Deck 4: Banking Services of Financial Institutions

Question 1

If you think interest rates will increase, you should consider investing your money in a longer-term GIC.

Answer 1

False

Question 2

A "free" chequing account with a minimum balance of $500 has no opportunity cost.

Answer 2

False

Question 3

Lower returns on savings will usually result in less liquidity.

Answer 3

False

Question 4

A trust is a safe place for people to make large deposits for maximum security

Question 5

Credit unions frequently offer lower loan rates than other financial institutions.

Question 6

A restrictive endorsement will usually include the words "for deposit only."

Question 7

The increase in purchasing power of an investment is not reflected in its real rate of return.

Question 8

All financial institutions are able to process customer deposit and withdrawal transactions.

Question 9

The more frequent the compounding, the less a person will earn on a savings account.

Question 10

ATM fees are about the same in different geographic areas.

Question 11

Time deposits are more commonly referred to deposits made to savings accounts and investment certificates.

Question 12

ATM fees may be different in different geographic areas.

Question 13

The money market fund offered by investment companies is a highly liquid financial service.

Question 14

A regular savings account usually offers a higher rate of return to savers than other savings plans.

Question 15

Savers should always attempt to obtain an interest rate that is less than the inflation rate.

Question 16

Store credit cards usually charge a higher interest rate than a bank credit card.

Question 17

Activity accounts are designed for people who write many cheques each month.

Question 18

Mortgage and loan companies specialize principally in home mortgages and long-term loans.

Question 19

Store credit cards usually charge a lower interest rate than a bank credit card.

Question 20

A "free" chequing account with a minimum balance of $500 has an opportunity cost of lost interest.

Question 21

The major service offered by investment companies is

A)interest-bearing checking accounts.
B)variable-rate loans.
C)credit card accounts.
D)savings bonds.
E)mutual funds.

Question 22

In recent years, membership in credit unions has

A)become more difficult due to higher taxes.
B)continued to increase.
C)been limited to government employees.
D)declined due to poor credit union management.
E)stayed at about the same level.

Question 23

A financial institution organized for the main purpose of providing loans to purchase homes is a

A)mortgage and loan company.
B)mutual savings bank.
C)consumer finance company.
D)credit union
E)commercial bank.

Question 24

Which of the following savings plans is not covered by federal deposit insurance?

A)a passbook account
B)a regular chequing account
C)a money market account
D)a money market fund
E)a GIC

Question 25

An advantage of Canada Savings Bonds is

A)interest earned is exempt from federal income taxes.
B)interest earned is deferred for federal tax purposes.
C)a guaranteed rate of return.
D)they can be converted to other types of investments.
E)they are sold twice a year.

Question 26

The business hours and location of a financial institution refer to the ____________ factor of selecting a financial institution.

A)safety
B)cost
C)compounding
D)liquidity
E)convenience

Question 27

The rate of return on a savings account is also referred to as

A)liquidity.
B)compounding.
C)asset management.
D)insolvency.
E)yield.

Question 28

Which of these is not a characteristic of the compound interest bond?

A)various purchase options
B)denominations of $100 up to $10,000
C)interest paid on November 1 of each year
D)can be purchased by cash
E)cashable at any time for their face value

Question 29

Direct deposit and automatic monthly payments are features of

A)savings accounts.
B)chequing accounts.
C)electronic banking.
D)investments.
E)reserve funds.

Question 30

The storage of funds for future use is the purpose of ____________ services.

A)trust
B)borrowing
C)credit card
D)savings
E)cash chequing

Question 31

A regular savings account usually offers a lower rate of return to savers than other savings plans.

Question 32

An all-purpose account that provides several services is a(n):

A)NOW account.
B)asset management account.
C)EFT account.
D)mutual fund.
E)money market account.

Question 33

To avoid high fees for loans, a person should not borrow from a

A)credit union.
B)savings and loan association.
C)pawnshop.
D)commercial bank.
E)mutual savings bank.

Question 34

An advantage credit unions may have over other financial institutions is

A)interest-bearing chequing accounts.
B)flexible-rate loans
C)low-cost personal loans.
D)credit cards.
E)variable-rate savings plans.

Question 35

A trust has the purpose of

A)solving a person's financial problems.
B)obtaining low-interest loans.
C)handling daily money management activities.
D)managing the assets of a person.
E)improving a person's budgeting skills.

Question 36

The convenience of using a financial institution with 24-hour banking frequently requires a trade-off with

A)safety.
B)personal service.
C)growth of savings.
D)liquidity.
E)a lower rate of return.

Question 37

When interest rates are rising, a person would be best served by

A)short term loans
B)long-term savings instruments.
C)short-term savings instruments.
D)variable-rate loans.
E)short-term loans and long-term savings instruments.

Question 38

If you think interest rates will decrease, you should consider investing your money in a longer-term GIC.

Question 39

Time deposits consist of

A)savings accounts.
B)loans and charge accounts.
C)chequing accounts.
D)government securities.
E)profits earned by a financial institution.

Question 40

Joan Zemke expects interest rates to decline over the next few months.To maximize her earnings she should use a(n)

A)five-year GIC.
B)interest-bearing chequing account.
C)regular savings account.
D)six-month GIC.
E)money market fund

Question 41

If the annual rate is 10% and inflation is 4%, then the approximate real rate of return is:

A)14.00%
B)4.00%
C)6.00%
D)6.80%
E)7.00%

Question 42

If the annual rate is 10%, and the interest is compounded quarterly, what is the effective annual rate?

A)10.00%
B)10.25%
C)10.38%
D)12.00%
E)12.68%

Question 43

The yield on a savings account is also referred to as

A)liquidity.
B)compounding.
C)asset management.
D)insolvency.
E)rate of return.

Question 44

A personal cheque with guaranteed payment is called a

A)traveler's cheque.
B)bank draft.
C)certified cheque.
D)money order.
E)cashier's cheque.

Question 45

If the annual rate is 8%, and the interest is compounded quarterly, what is the effective annual rate?

A)8.00%
B)10.25%
C)10.38%
D)7.85%
E)8.24%

Question 46

Based on the following information, what amount would be SUBTRACTED from the BANK BALANCE side of a chequing account reconciliation? Service charge $6, Outstanding cheques $260, Interest $3.00, Deposit in transit $65

A)$260
B)$65
C)$71
D)$68
E)$266

Question 47

Savings compounded ____________ would have the highest effective yield

A)monthly
B)annually
C)semi-annually
D)daily
E)weekly

Question 48

Briana Legett expects interest rates to decline over the next few months.To maximize her earnings she should use a(n):

A)regular savings account.
B)interest-bearing checking account.
C)five-year certificate of deposit.
D)six-month certificate of deposit.
E)money market fund

Question 49

A $400 savings account that earns $15 interest in a year has a yield of ____________ percent.

A)6
B)15
C)4.75
D)3.75
E)6.5

Question 50

Comparison of earnings for different savings plans can best be accomplished using the

A)discounted present value.
B)compounded rate of return.
C)net present value.
D)effective annual rate.
E)after-tax rate of return.

Question 51

The funds deposited in a chequing account can be restricted for use by

A)a holding period.
B)outstanding cheques.
C)interest earned.
D)service charges.
E)electronic banking.

Question 52

Which of these is not a characteristic of the compound interest bond?

A)various purchase options
B)denominations of $100 up to $10,000
C)cashable at any time for their face value
D)can be purchased by cash
E)A, B, C and D are all characteristics of the compound interest bond.

Question 53

A service designed for people who write only a few cheques each month is a(n) ____________ account.

A)EFT
B)regular chequing
C)share draft
D)interest-bearing chequing
E)activity

Question 54

Savings compounded ____________ would have the lowest effective yield

A)monthly
B)annually
C)semi-annually
D)daily
E)weekly

Question 55

Kevin Friedman only needs to write a couple of cheques each month.Which type of chequing account would best serve his needs?

A)an interest-earning chequing account
B)an activity account
C)an EFT account
D)a share draft account
E)a NOW account

Question 56

Which best describes the prime rate of interest?

A)The lending rate banks charge their most creditworthy clients
B)The yield on 91-day treasury bills
C)The yield on 30-year government bonds
D)The lending rate the Bank of Canada charges financial institutions.
E)The base rate for all mortgages

Question 57

A $100 savings account that earns $5 interest in a year has a yield of ____________ percent.

A)6
B)5
C)4.75
D)3.75
E)6.5

Question 58

A saver will usually earn the highest rate with which of the following types of savings plans?

A)Guaranteed Investment Certificates
B)club account
C)passbook account
D)share account
E)NOW account

Question 59

When interest rates are falling, a person would be best served by

A)short term loans
B)short-term savings instruments.
C)same approach as if interest rates are rising.
D)variable-rate loans.
E)long term loans.

Question 60

The "prime" rate is ___________________________.

A)The lending rate banks charge their most creditworthy clients
B)The yield on 91-day treasury bills
C)The yield on 30-year government bonds
D)The yield on 1-year government bonds
E)The yield on corporate bonds

Question 61

Which of the flowing is not a benefit of online banking?

A)Time savings
B)No paper trail
C)Email notices of due dates
D)Phishing
E)Convenience

Question 62

What is a drawback of a money market fund?

A)Low rate of return
B)Minimum deposit
C)Service charges
D)High minimum balance required
E)Not guaranteed

Question 63

What is a drawback of a money market account?

A)Low rate of return
B)Minimum deposit
C)Service charges
D)High minimum balance required
E)Not guaranteed

Question 64

A cashier's cheque is what type of short term financial service?

A)Savings
B)Chequing
C)Credit Card
D)Cash availability
E)Investment

Question 65

Robert expects interest rates to rise over the next few months.To maximize his earnings he should use a:

A)regular savings account.
B)five year GIC.
C)five-year certificate of deposit.
D)six-month certificate of deposit.
E)money market fund

Question 66

A cash advance is what type of short term financial service?

A)Savings
B)Chequing
C)Credit Card
D)Cash availability
E)Investment

Question 67

Brokerage services are what type of long term financial service?

A)Savings
B)Chequing
C)Credit Card
D)Cash availability
E)Investment

Question 68

Which of the flowing is not a concern of online banking?

A)Time savings
B)Costly fees for ATM's
C)Difficulty depositing cash
D)Phishing
E)Overspending

Question 69

If the annual rate is 2% and inflation is 3%, then the approximate real rate of return is:

A)5.00%
B)3.00%
C)1.00%
D)- 1.0%
E)0%

Question 70

From an investor's point of view what annual compounding frequency is best?

A)Daily
B)Monthly
C)Quarterly
D)Semi-annually
E)Annually

Question 71

If the annual rate is 3% and inflation is 2%, then the approximate real rate of return is:

A)5.00%
B)3.00%
C)1.00%
D)- 1.0%
E)0%

Question 72

Short term financial servies for short term needs include which one of the following?

A)Cheque cashing
B)Cash loans for autos
C)RRSP's
D)Insurance
E)Budget counselling

Question 73

Foreign currency exchange is what type of short term financial service?

A)Savings
B)Chequing
C)Credit Card
D)Cash availability
E)Investment

Question 74

What is a drawback of a Guaranteed Investment Certificate?

A)Low rate of return
B)Minimum deposit
C)Service charges
D)High minimum balance required
E)Not guaranteed

Question 75

Which of the flowing is not a non-deposit institution?

A)Life insurance companies
B)Mortgage companies
C)Pawnshops
D)Investment Companies
E)Trust companies

Question 76

If the annual rate is 8%, and the interest is compounded annually, what is the effective annual rate?

A)8.00%
B)10.25%
C)10.38%
D)7.85%
E)8.24%

Question 77

What is the major reason why merchants accept Bitcoin?

A)Safer than cash
B)Safer than credit cards
C)Lower fees than credit cards
D)Consumers prefer to pay in cryptocurrency
E)They want to have off book activities

Question 78

What is a drawback of a regular savings account?

A)Low rate of return
B)Minimum deposit
C)Service charges
D)High minimum balance required
E)Not guaranteed

Question 79

If the annual rate is 8%, and the interest is compounded monthly, what is the effective annual rate?

A)8.00%
B)10.25%
C)10.38%
D)7.85%
E)8.30%

Question 80

A money market account is what type of short term financial service?

A)Savings
B)Chequing
C)Credit Card
D)Cash availability
E)Investment