Deck 4: Managing Your Cash and Savings

Question 1

Specialization within the financial institutions industry continues to increase.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

Saving accounts are sometimes referred to as demand deposits.

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

Credit union members are expected to have some common bond.

Question 24

Most credit unions provide their members with deposit insurance.

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

As of 2012,if your account balances at a bank are $115,000,you will have depositor's insurance for up to $250,000.

Question 30

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

Question 31

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

Question 32

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

Question 33

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 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

A regular savings account is a demand deposit.

Question 39

As of 2012,the FDIC insures depositor's funds up to $250,000 at member banks.

Question 40

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

Question 41

Treasury bills are sold at their face value.

Question 42

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 43

Series EE Savings bonds are now called Patriot Bonds.

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

ATM transactions require the use of a PIN.

Question 54

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

Question 55

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 56

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 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

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

Question 62

Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal financial planning.She would like to receive a fixed rate of return over that period.Which of the following would you recommend?

A) money market deposit account
B) 1-year certificate of deposit
C) 3-year certificate of deposit
D) Series EE US savings bond
E) b or c

Question 63

Low interest rates have increased the supply of credit.

Question 64

Low interest rates that have persisted since the financial crisis of 2008-09 have been a net benefit to retirees.

Question 65

With low interest rates,savers have begun investing in stock where higher yields can be found.

Question 66

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 67

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

Question 68

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

Question 69

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

Question 70

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

Question 71

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 72

Money Market Deposit Accounts

A) allow unlimited check writing.
B) are typically federally insured.
C) have stated maturity dates.
D) are offered only by credit unions.
E) all of these.

Question 73

Which of the following would be an appropriate savings vehicle if you expected interest rates to fall over the next few months?

A) money market deposit account
B) money market mutual fund
C) certificate of deposit
D) Series EE US savings bond
E) a and b

Question 74

Money Market Mutual Funds

A) allow check writing.
B) are typically federally insured.
C) have stated maturity dates.
D) are offered by banks, S & Ls, and credit unions.
E) all of these.

Question 75

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

Question 76

Low interest rates encourage the substitution of capital for labor,thereby depressing employment.

Question 77

In the wake of the recent financial crisis,the U.S.personal saving rate decreased.

Question 78

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

Question 79

When an S & L is a mutual association,it means that it is owned by the

A) borrowers.
B) creditors.
C) depositors.
D) management.
E) local government.

Question 80

Lower borrowing costs encourage the substitution of debt for equity in corporate capital structures,which increases financial risk.