Deck 21: Flexible Savings Account Options

Question 1

Consumers, as a group, are the most important lenders of funds in the American economy.

Answer 1

True

Question 2

Time and savings deposits represented less than 5 percent of the total financial asset holdings of American consumers in 2009.

Answer 2

False

Question 3

Consumer purchases of corporate stock have declined drastically over the past decade.

Answer 3

True

Question 4

Universal life insurance policies combine insurance protection plus money-market fund investments.

Question 5

Share accounts are offered by money-market mutual funds.

Question 6

Wage earners and salaried individuals may set up an IRA account to set aside a portion of their wages for retirement.

Question 7

Under the Competitive Banking Equality Act, Banks may delay crediting a deposit to an account for up to 10 business days.

Question 8

The Share Draft is the credit union version of the NOW.

Question 9

Automatic transfers and share drafts compete with NOWs.

Question 10

Both Super NOW and money market deposit accounts (MMDAs) have checking account privileges.

Question 11

The total outstanding debt owed by U.S. households exceeded $14 trillion by the year end 2009.

Question 12

Consumer installment debt has not shown a significant increase over the past decade.

Question 13

Non installment credit normally is paid off in two equal payments every 6 months.

Question 14

Convenience users of credit cards are the most profitable type of customer for a credit card issuing firm.

Question 15

Credit card holders tend to have higher incomes and better payment records than the general population.

Question 16

Interest on home equity loans is tax deductible under current federal law.

Question 17

Debit cards may be used for payments but they cannot eliminate float.

Question 18

Young families tend to be heavy users of debt.

Question 19

Expectations of future inflation cause consumer borrowing to decrease.

Question 20

The trend in recent years has been for consumer lending institutions to diversify their lending operations.

Question 21

The single most important consumer lending institution is the savings and loan association.

Question 22

Commercial banks have increased their share of the market for auto and mobile home loans.

Question 23

Finance companies currently make more mobile home loans than commercial banks.

Question 24

Consumer loans usually carry less risk than most other kinds of loans.

Question 25

Consumer loans are more costly to make per dollar of loan then any other kind of loan.

Question 26

The character of the borrower is the single most important issue in the decision to grant or deny a consumer loan.

Question 27

A consumer may challenge any item which appears in his or her credit file and demand an investigation.

Question 28

The Truth in Lending Law requires lenders to disclose the total dollar cost associated with granting a loan.

Question 29

Women are a major beneficiary of the Equal Credit Opportunity Act.

Question 30

Consumers filing for bankruptcy can use one of two methods: Chapter 7 or Chapter 13.

Question 31

According to federal law, filing for bankruptcy under Chapter 13 normally completely discharges all of a household's unsecured debts.

Question 32

A Chapter 7 bankruptcy can remain on the consumer's credit record for as long as 10 years.

Question 33

A Chapter 13 bankruptcy filing sets in motion a new debt repayment plan and such a filing normally disappears from the consumer's credit record after 7 years.

Question 34

Under Chapter 7 bankruptcy rules secured obligations, e.g., home mortgage loans and auto credit, are usually still subject to being repaid by the bankrupt consumer. If not, the property can be repossessed.

Question 35

Common stock is the principal financial asset held by U.S. consumers.

Question 36

A financial asset whose rate of return is tied to the performance of the stock market is known as the share draft account.

Question 37

A financial asset whose rate of return is tied to the performance of the stock market is known as the share draft account.

Question 38

An interest-bearing checkbook deposit with up to six preauthorized third-party transfers out of the account, only three of which may be by check, is known as a share account.

Question 39

The Competitive Equality Banking Act requires lenders granting home equity loans to set a maximum or ceiling rate above, which the borrower's loan rate cannot rise.

Question 40

A borrower has a home appraised at $100,000 and still owes $70,000 on the home mortgage. If the lender insists on a required loan-to-value ratio of 70 percent, the homeowner's borrowing base must be $25,000.

Question 41

In 2009, the Federal Reserve imposed a restrictive rule on the levying of overdraft fees charged by banks and other lending institutions.

Question 42

The Financial Institutions Reform, Recovery and Enforcement Act requires public disclosure of a bank's performance rating in meeting the credit needs of its local community.

Question 43

By 2000, consumers held more in mutual fund assets than in corporate stocks.

Question 44

Banks must publicly disclose their performance rating under the Community Reinvestment Act.

Question 45

The Truth in Savings Act prohibits inaccurate or misleading advertising about deposit accounts.

Question 46

Depositors must receive credit for local checks they deposit after two business days.

Question 47

Pawn shops and other "fringe banks" primarily serve individuals with stable and lengthy credit histories.

Question 48

The primary advantage of universal life insurance is that it is available to everyone.

Question 49

U.S. household debt-to-income ratios rose to over 80 percent in the mid-1990s.

Question 50

The Consumer Protection Act of 1988 prohibits a home equity lender from canceling a loan unless fraud, failure to pay or other violations of the loan contract occur.

Question 51

Credit cards have removed the "liquidity constraint" that restricted the spending power of millions of consumers, democratizing access to credit and spending power.

Question 52

So-called "Smart Cards" have pre-encoded information such as a pre-authorized credit line to finance the cardholder's purchases.

Question 53

U.S. Congress debated a powerful new bankruptcy bill in the late 1990s and as the twenty-first century began. The proposed new law would raise the cost of consumer bankruptcies and demand that households seeking bankruptcy relief from their creditors receive training in the hope of avoiding future financial problems.

Question 54

According to the Financial Services Modernization Act, each consumer has to be offered the possibility to "opt out" of at least some information sharing. However, many consumer groups have recently complained that this law is too weak in protecting consumers' personal data and have demanded new privacy laws at federal and state levels.

Question 55

U.S. households borrowed nearly $667 billion in 2009 and by the end of the year owed more than $14 trillion to various lending institutions.

Question 56

Total pension fund reserves ranked low among all household assets, just exceeding $7 trillion by the year 2009.

Question 57

Credit extended by a credit card is referred to as revolving credit because the borrower can borrow up to a pre-specified limit, pay back the borrowed money, and borrow again.

Question 58

The Credit Card Act of 2009 was developed to promote greater disclosure and transparency in card usage.

Question 59

Consumer saving and borrowing tends to follow the ups and downs of the business cycle, as households tend to use borrowing and saving as devices to smooth out consumer spending over the course of the business cycle.

Question 60

Most studies of the bankruptcy phenomena find the principal cause of bankruptcy filings to be the incident of tragic offense in people's lives (e.g., loss of a job, destruction of a home, medical expenses, divorce).

Question 61

Eligibility for filing under the new bankruptcy code is subject to a means test, which calls for determining the applicant's monthly average income and comparing that figure to the median income level in his or her home state.

Question 62

In choosing financial assets, modern U.S. household tends to emphasize:

A) Safety.
B) Liquidity.
C) Long-term financial security.
D) A and B only.
E) A and C only.
F) All of the above.

Question 63

Total pension fund reserves ranked at the top among all household assets, just exceeding _________ by the year 2009.

A) $11 trillion
B) $7 trillion
C) $20 trillion
D) $3 trillion
E) None of the above

Question 64

In 2009 mortgage loans represented about _____ of all household debt in the United States.

A) 50%
B) 75%
C) 25%
D) 35%
E) 40%

Question 65

A combination risk protection and savings instrument offering the consumer money market yields on funds accumulated in a mutual fund is called:

A) Keogh plan
B) Universal life insurance
C) MMDAs
D) Roth IRA
E) None of the above

Question 66

Prior to notification of loss or theft the credit card holder is responsible for a maximum of _____ in authorized charges.

A) $25
B) $50
C) $100
D) $150
E) $125

Question 67

The consumer lending institution dominant in residential mortgage lending is the:

A) Commercial bank
B) Finance company
C) Savings and loan association
D) Credit union
E) None of the above

Question 68

The ratio of liabilities to assets for the household sector in 2000 was approximately:

A) 10%
B) 25%
C) 50%
D) 60%
E) 75%

Question 69

In order to secure a loan, a rule of thumb used by many loan officers holds that the consumer's debt should not exceed _____ of the family's monthly or annual gross income.

A) 5%
B) 8%
C) 20%
D) 30%
E) 50%

Question 70

Which of the following laws requires institutions to make an "affirmative effort" to meet the credit needs of low to middle income customers?

A) Equal Credit Opportunity Act
B) Community Reinvestment Act
C) Fair Credit Billing Act
D) Fair Credit Reporting Act
E) Home Mortgage Disclosure Act

Question 71

The law which entitles consumers to have access to their credit files is the:

A) Equal Credit Opportunity Act
B) Community Reinvestment Act
C) Fair Credit Billing Act
D) Fair Credit Reporting Act
E) Home Mortgage Disclosure Act

Question 72

In recent years, household bankruptcies have soared. Currently, approximately _____ of all U.S. households file for personal bankruptcy annually.

A) 0.2%
B) 1%
C) 3%
D) 5%
E) None of the above

Question 73

After slackening early in the 1990s, household debt-to-income ratios rose to more than _____ in the late 1990s.

A) 78%
B) 55%
C) 95%
D) 125%
E) None of the above

Question 74

The principal financial asset held by U.S. households is:

A) Common stock
B) Life insurance policies
C) Pension plans
D) Government bonds
E) None of the above

Question 75

A financial asset whose rate of return is tied to the performance of the stock market or is based upon some other market indicator is known as a(n):

A) Combined brokerage and cash-management services
B) Automatic transfer service (ATS)
C) Market-index certificates of deposit
D) Share accounts
E) None of the above

Question 76

A savings plan allowing withdrawals or deposits at any time (though, technically, a seven-day withdrawal notice may be required) is known as a(n):

A) Passbook savings account
B) Super NOW
C) MMDA
D) Share draft
E) None of the above

Question 77

Recent legislation that calls for greater transparency in credit cards is the:

A) Fair Credit Billing Act
B) Credit Transparency Act
C) Equal Credit Opportunity Act
D) Credit Card Act of 2009
E) None of the above

Question 78

The difference between the appraised market value of the borrower's home and the unpaid amount of the mortgage against the home multiplied by the lender's required loan-to value ratio is known as the:

A) Net value
B) Borrowing base
C) Revolving credit line
D) Adjusted homeowner's equity position
E) None of the above

Question 79

The federal law that requires that a maximum ceiling loan rate be established for all home equity loans is known as the:

A) Garn-St Germain Depository Institutions Act
B) Depository Institutions Deregulation Act
C) Competitive Equality Banking Act
D) Home Mortgage Disclosure Act
E) None of the above

Question 80

The federal law that requires public disclosure of a bank's performance rating in meeting the credit needs of its local community is the:

A) Garn-St Germain Depository Institutions Act
B) Competitive Equality Banking Act
C) Home Mortgage Disclosure Act
D) Financial Institutions Reform, Recovery and Enforcement Act
E) None of the above