Deck 17: Financial Services

Question 1

In order to operate, a bank must receive a charter from the state or federal government.

Answer 1

True

Question 2

A consumer loan is an example of a demand deposit.

Answer 2

False

Question 3

Stockbrokers, finance companies, and insurance companies are all nonbank financial institutions.

Answer 3

True

Question 4

Rather than making payments using paper checks, many businesses and consumers use debit cards.

Question 5

An endorsement on a check must be handwritten.

Question 6

An unsecured loan is backed by something of value to ensure payment.

Question 7

When borrowing $5,000 to purchase a new piece of equipment, the owner of a successful small business should expect the interest rate to be higher than the prime rate.

Question 8

Although it was once illegal, banks are now permitted to pay interest on business checking accounts.

Question 9

The federal government encourages people to use direct deposit for payments such as tax refunds and Social Security benefit.

Question 10

A savings account usually earns a lower interest rate than a certificate of deposit.

Question 11

A certificate of deposit allows deposits and withdrawals at any time without a financial penalty.

Question 12

Money market fund depositors have check-writing privileges and can withdraw funds at any time without penalty.

Question 13

A mutual fund pools the money of many investors primarily for the purchase of stocks and bonds.

Question 14

Treasury instruments are securities sold to finance the cost of running the government.

Question 15

Businesses frequently avoid investing in Treasury bonds because of their high-risk potential.

Question 16

Investors who enjoy taking risks in hopes of earning more money would likely buy stock in newly developed corporations.

Question 17

Investors diversify by placing money in different categories of investments instead of just one.

Question 18

That interest rate on TIPS remains the same for the term of the security while the principal is
adjusted to reflect the current CPI.

Question 19

When compared over time, each stock index provides investors with a picture of what is happening in the U.S.market but NOT in the world's financial market.

Question 20

Most skilled investors can usually predict when the market will reach its high and low points.

Question 21

Demand deposits are

A) accounts that permit depositors to make withdrawals at any time without penalty
B) accounts in which money is deposited for a fixed period
C) accounts in which deposits are invested in short-term, government-backed securities
D) accounts that pool the money of many investors to deposit in stocks and bonds

Question 22

Which financial institution offers the widest variety of services?

A) Savings banks
B) Savings and loan associations
C) Trust companies
D) Commercial banks

Question 23

A financial institution that offers loans and deposit services to members only is the

A) savings institution
B) credit union
C) FDIC
D) commercial bank

Question 24

In processing checks, an exact digital copy of an original check is a

A) duplicate check
B) facsimile check
C) replica check
D) substitute check

Question 25

Which of the following would be accepted by a bank as security for a business loan?

A) Accounts payable
B) Merchandise inventory
C) A rented building
D) Leased equipment

Question 26

A finance company is a type of nonbank that

A) accepts deposits
B) collects premiums on insurance products
C) obtains funds by issuing securities
D) invests in pension funds

Question 27

Banks offer reliable customers a maximum amount of money that can be borrowed over a specified period, called a

A) line of credit
B) collateral
C) secured loan
D) collateral line

Question 28

A variable interest rate is

A) charged by large banks for large sums to the best-qualified borrowers
B) lower than the prime rate
C) usually cheaper at the beginning of the loan
D) set for the full term of the loan

Question 29

EFTs can handle all of the following except

A) direct deposits
B) payroll preparation
C) ATM withdrawals
D) debit-card payments

Question 30

With ATMs, bank customers can

A) deposit, withdraw, and transfer funds
B) deposit and transfer funds
C) withdraw, and transfer funds
D) withdraw funds

Question 31

According to studies, which of the following banking transactions is the cheapest?

A) an Internet transaction
B) a telephone transaction
C) a face-to-face transaction
D) an ATM transaction

Question 32

Which statement is incorrect about CDs?

A) The interest rate on a one-year CD will likely be higher than the rate on a three-month CD.
B) Savings accounts usually pay a higher rate of interest than CDs.
C) Withdrawing money from a CD before the end of its term will likely result in a financial penalty.
D) CDs can be purchased for periods ranging from three months to five years.

Question 33

For a person who wants to invest $10,000 for a three-month period, one of the safest of all short-term investments would be a

A) mutual fund
B) trust fund
C) Treasury bill
D) secured loan

Question 34

A good rule to follow when investing is to

A) invest entirely in bonds since they are safe investments
B) invest entirely in stocks if the market value is high
C) invest entirely in money market funds
D) diversify by investing in stocks, bonds, and money market funds

Question 35

The highest degree of liquidity can be found in

A) a certificate of deposit
B) Treasury notes
C) a mutual fund
D) a checking account

Question 36

The total amount of savings bonds that can be purchased by an investor during any year is

A) $1,000 per series
B) $5,000 per series
C) $10,000 per series
D) $50,000 per series

Question 37

Interest earned on U.S.savings bonds is exempt from

A) all income taxes.
B) federal income taxes.
C) federal and state income taxes.
D) state and local income taxes.

Question 38

Treasury instruments, ranked from lowest to highest interest rate, include

A) Treasury bond, Treasury note, Treasury bill.
B) Treasury bond, Treasury bill, Treasury note.
C) Treasury bill, Treasury bond, Treasury note.
D) Treasury bill, Treasury note, Treasury bond.

Question 39

Which of the following sayings helps explain the concept of diversity as it relates to investing"

A) Don't count your chickens before they hatch.
B) Don't put all you eggs in one basket.
C) Don't put the cart before the horse.
D) Don't put off until tomorrow what you can do today.

Question 40

Match each item with the correct statement below.

-A loan backed by something of value owned by the borrower.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 41

Match each item with the correct statement below.

-An organization that collects money from clients and uses it for investments to benefit both the client and the organization.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 42

Match each item with the correct statement below.

-Financial institution whose primary purpose is to offer financial products and services other than deposits and loans.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 43

Match each item with the correct statement below.

-Money put into a financial institution by depositors which can be withdrawn at any time without penalty.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 44

Match each item with the correct statement below.

-Non-negotiable securities sold by the U.S.Treasury.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 45

Match each item with the correct statement below.

-Property a borrower pledges to assure repayment of a loan.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 46

Match each item with the correct statement below.

-Securities issued by the U.S.government.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 47

Match each item with the correct statement below.

-The ease of turning an investment into cash without significant loss.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 48

Match each item with the correct statement below.

-The use of money to make more money.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments

Question 49

Match each item with the correct statement below.

-Transferring money by computer.

A)Bank
B)Collateral
C)demand deposit
D)direct deposit
E)diversity
F)electronic funds transfer
G)financial institution
H)investment
I)liquidity
J)nonbank
K)savings bond
L)secured loan
M)time deposit
N)Treasury instruments