Deck 4: Managing Your Cash and Savings

Question 1

One could expect to earn a higher rate of interest on a certificate of deposit that on a checking account.

Answer 1

True

Question 2

A liquid financial asset can be quickly converted into cash,but there is often a large loss of value as a result of the quick conversion to cash.

Answer 2

False

Question 3

Specialization within the financial institutions industry continues to increase.

Answer 3

False

Question 4

There are some limitations on check writing for both MMDAs and MMMFs.

Question 5

A primary reason for holding liquid assets is to save for short-term goals.

Question 6

Deregulation of financial institutions in the 1980s has made it easier to distinguish between the services of a commercial bank and a savings and loan association.

Question 7

The market value of liquid assets fluctuates over the short-run.

Question 8

Asset management accounts are protected by the Federal Deposit Insurance Corporation.

Question 9

Saving accounts are sometimes referred to as demand deposits.

Question 10

Money market deposit accounts are insured by the FDIC if purchased at an insured bank.

Question 11

FDIC covers stocks,bonds,and mutual funds purchased at banks.

Question 12

Certificates of deposit can be purchased only at banks,savings and loan associations,and credit unions.

Question 13

Credit unions typically pay higher rates of return on savings than banks and savings and loan associations.

Question 14

NOW accounts are appropriate for people who need to keep substantial amounts of money in a checking account.

Question 15

The Truth in Savings Act was designed to help consumers compare terms and costs of banking products.

Question 16

There is a penalty for early withdrawal of funds from CDs purchased from brokerage firms.

Question 17

A passbook savings account may be a useful tool in managing everyday household transactions.

Question 18

Money market mutual funds are insured up to $250,000 by the FDIC if purchased at an insured bank.

Question 19

The rate of return on liquid assets is relatively high compared to other types of investments.

Question 20

One can avoid early withdrawal penalties on CDs by purchasing them through brokerage firms.

Question 21

As of 2009,the FDIC insures depositor's funds up to $250,000 at member banks.

Question 22

Credit union members are expected to have some common bond.

Question 23

Asset management accounts combine many cash management services into one account.

Question 24

Savings and loan associations (S & Ls)channel the savings of depositors primarily into automotive loans.

Question 25

Maximizing the use of "float" is one advantage of using on-line banking services.

Question 26

The annual percentage yield (APY)formula considers compounding when determining an interest rate.

Question 27

The maximum amount of interest a bank can now pay on a passbook savings account is 3 1/2%.

Question 28

From the bank's perspective,ATM transactions are more costly than on-line banking transactions.

Question 29

S&Ls represent the largest segment of the financial institutions industry.

Question 30

EFTS allow you to make payments that occur on a regular basis.

Question 31

Savings and loan associations usually offer non-interest bearing checking accounts.

Question 32

Savings banks are mainly found in the northeastern U.S.

Question 33

The main business of an S&L is to provide home mortgage and home improvement loans.

Question 34

Money Market Mutual Funds invest in long-term treasury securities and other types of bonds.

Question 35

Another term for the interest paid by credit unions on deposits is dividends.

Question 36

Credit unions are mainly found in the northeastern U.S.

Question 37

A regular savings account is a demand deposit.

Question 38

Convenience and improved record keeping are two advantages sited for on-line bill payment.

Question 39

The prime candidate for using an Internet bank is a person who rarely visits their bank.

Question 40

Banks and other financial institutions insure the contents of safe-deposit boxes.

Question 41

Internet-only banks typically pay lower interest rates on savings than traditional banks.

Question 42

The minimum denomination for Treasury bills is now $1,000.

Question 43

ATM transactions require the use of a PIN.

Question 44

Mary Young has a checking account in her name and a joint savings account with her husband at her bank.The maximum amount of deposit insurance she has is $100,000.

Question 45

Most credit unions provide their members with deposit insurance.

Question 46

Debit and ATM card transactions are linked to your checking account.

Question 47

Passbook accounts are better than checking accounts if you want to accumulate money for future expenditures.

Question 48

One can typically get the best exchange rate when traveling in foreign countries by getting cash through your bank's ATM network.

Question 49

Money held in checking accounts is liquid.

Question 50

A money market mutual fund is one way to participate indirectly in the purchase of money market securities.

Question 51

If Suzie has $2,000 in checking,$50,000 in a money market account,and $75,000 in certificates of deposit (all individual accounts)at her local bank,her accounts would be completely insured through FDIC.

Question 52

Treasury bills are sold at a discount of their maturity value.

Question 53

Financial institutions expect demand deposits to remain on deposit for a longer period of time than time deposits.

Question 54

Although there are no legal minimum balances for a NOW account,many institutions impose their own requirement,often between $500 and $1,000 before they pay any interest.

Question 55

Treasury bills are sold at their face value.

Question 56

If one wanted to make monthly deposits to accumulate funds for future expenditures,a money market account would be an appropriate savings vehicle.

Question 57

If Lois has $2,000 in checking,$50,000 in a money market account,and $75,000 in certificates of deposit (all individual accounts)at her local bank,her accounts would be insured through FDIC for $100,000.

Question 58

As of 2009,if your account balances at a bank are $115,000,you will have depositor's insurance for up to $250,000.

Question 59

Stop-payment services are easier with electronic funds transfers that with traditional check payments.

Question 60

Asset management accounts are offered by most banks and are typically FDIC insured.

Question 61

The rate of return on a Series EE savings bond changes semiannually.

Question 62

The rate of return on a Series EE savings bond will be constant over the life of the bond.

Question 63

A cashier's check is written on the bank's account rather than on a customer's account.

Question 64

You put $1,000 into a 12-month certificate of deposit.After seven months,you really need the money.The bank will let you have it before 12 months,but you will pay a penalty.

Question 65

A certified check is written on the bank's account rather than on a customer's account.

Question 66

You can stop payment when you purchase an item with your debit card.

Question 67

If your bank states that it compounds monthly,the effective interest rate (APY)will be greater than the nominal interest rate.

Question 68

A bank could advertise as "free" a checking account that requires a minimum balance of $3,000 to avoid monthly service charges.

Question 69

The nominal rate of interest will be lower than the effective rate of interest when an account compounds monthly.

Question 70

A major reason for overdrafts is the inability of a check writer to keep an accurate check ledger.

Question 71

Joint checking accounts imply the right of survivorship if one party should die.

Question 72

Your savings will grow faster with monthly interest compounding than with quarterly interest compounding.

Question 73

A certified check is a personal check that the bank guarantees the funds are available.

Question 74

____ is not a liquid asset.

A) Bond mutual funds
B) An interest-paying checking account
C) A passbook savings account
D) A checking account
E) A money market mutual fund

Question 75

Series EE Savings bonds are now called Patriot Bonds.

Question 76

You should invest in long-term CDs when you expect interest rate to fall.

Question 77

A stop payment results in an absolute promise by the bank not to pay the indicated check.

Question 78

Compound interest means that a savings account earns interest on the interest previously earned.

Question 79

Factors typically influencing the choice of where to maintain a checking account are:

A) convenience and cost
B) convenience and services
C) cost and services
D) convenience,services,and cost

Question 80

The key to a successful savings program is to save regularly.