Deck 5: Financial Services: Savings Plans and Payment Accounts

Question 1

Using a "debit card" to make purchases means you are spending your own funds.

Answer 1

True

Question 2

Which of the following is organized as a corporation and owned by stockholders?

A)credit unions
B)investment companies
C)mutual savings banks
D)savings and loan associations
E)commercial banks

Answer 2

commercial banks

Question 3

A certificate of deposit is also known as a demand deposit.

Answer 3

False

Question 4

A restrictive endorsement consists of the words "for deposit only."

Question 5

Demand deposits are another term for checking accounts.

Question 6

Which of the following statements regarding debit and credit card liability is correct?

A)A credit card carries more risk of loss to the cardholder.
B)A debit card carries more risk of loss to the cardholder.
C)There is no cardholder liability if either type of card is lost.
D)The Federal Government insures losses on credit but not debit cards.
E)The Federal Government insures losses on debit but not credit cards.

Question 7

When preparing a bank reconciliation,interest earned on your checking account is added to the bank statement balance.

Question 8

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

Question 9

An all-purpose account offered by investment brokers that provides several services is a:

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

Question 10

A " no-fee" checking account that requires a non-interest-earning minimum balance of $500 has an opportunity cost of lost interest earnings.

Question 11

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

Question 12

Checking accounts are frequently referred to as ____________ deposits.

A)common
B)time
C)current
D)loan
E)demand

Question 13

Time deposits are another name for:

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

Question 14

An asset management account combines a complete financial services program for a single fee.

Question 15

A debit card deducts the amount of purchases from your checking account by:

A)transferring money electronically.
B)obtaining a discount on consumer purchases.
C)making credit card purchases.
D) quickly obtaining a cash loan.
E)making investments with an investment company.

Question 16

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

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

Question 17

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions.

Question 18

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 19

The storage of funds for future use is a purpose of ____________,which include savings accounts and certificates of deposit.

A)trust
B)borrowing
C)credit card
D)time deposits
E)cash checking

Question 20

Joan Zemke expects interest rates to decline over the next few months.To maximize her long-term earnings she should use a:

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

Question 21

A $200 savings account that earns $13 interest in a year has a yield of _______ percent.

A)6.00
B)13.00
C)7.50
D)11.25
E)6.50

Question 22

An advantage credit unions may have over other financial institutions is:

A)interest-bearing checking accounts.
B)lower loan rates.
C)flexible-rate loans.
D)credit cards.
E)variable-rate savings plans.

Question 23

To avoid high fees for cash loans,a person should avoid borrowing from a:

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

Question 24

A savings account at a credit union is called a ____________ account.

A)share
B)NOW
C)club
D)certificate
E)money market

Question 25

In recent years,membership in credit unions has:

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

Question 26

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

A)Account at a savings and loan
B)Regular checking account at a commercial bank
C)Money market account at a commercial bank
D)Money market fund with an investment company
E)Certificate of deposit at a commercial bank

Question 27

A limit on the amount you must keep on deposit in order to earn interest or avoid a service charge is an example of a:

A)holding period.
B)restriction.
C)overdraft fee.
D)share draft.
E)certified deposit fee.

Question 28

Which of the following is an effective strategy in times of falling interest rates?

A)Use long-term loans to take advantage of current low rates.
B)Use short-term loans to take advantage of lower rates when you refinance the loans.
C)Select short-term savings instruments to take advantage of higher rates when they mature.
D)Select short-term savings instruments to lock-in earnings at current high rates.
E)Select long-term savings instruments to lock-in earnings at current low rates.

Question 29

The Federal Deposit Insurance Corporation provides deposit insurance for:

A)credit unions and mutual savings banks.
B)commercial banks and savings and loan associations.
C)investment companies and finance companies.
D)insurance companies and credit unions.
E)commercial banks and credit unions.

Question 30

A saver will usually receive the highest earnings with which one of the following types of savings plans?

A)Certificate of deposit
B)Debit account
C)Regular savings account
D)Share account
E)Credit account

Question 31

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 32

Which is an advantage of investing in Series EE U.S.Savings Bonds?

A)When a bond is redeemed, the earned interest is always exempt from federal income taxes.
B)Federal income tax on earnings is not due until the bonds are redeemed.
C)The interest rate on the bond is adjusted to keep up with inflation.
D)Series EE Bonds can be sold at a profit on the open bond market.
E)The rates on Series EE Bonds are usually higher than the rates offered on stocks or corporate bonds.

Question 33

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

A)liquidity.
B)compounding.
C)yield.
D)opportunity cost.
E)asset turnover.

Question 34

The Truth in Savings law requires that financial institutions:

A)provide insurance for savings accounts.
B)send customers monthly bank statements.
C)report annual percentage yield on savings.
D)offer adjustable rate savings accounts.
E)become members of the Federal Reserve System.

Question 35

The Expedited Funds Availability Act requires that funds be available to depositors:

A)within 5 business days for local checks.
B)within 2 business days for local checks.
C)within 2 business days for both local checks and out-of-town checks.
D)within 2 business days for out-of-town checks.
E)immediately upon deposit.

Question 36

Savings compounded ____________ would have the highest effective yield.

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

Question 37

A common service offered by investment companies is:

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

Question 38

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)annual percentage yield.
E)after-tax rate of return.

Question 39

The profits from a mutual savings bank go to the:

A)creditors.
B)loan applicants.
C)stockholders.
D)depositors.
E)community in which it operates.

Question 40

A certificate of deposit usually has:

A)a high interest-rate risk.
B)a high safety risk for savers.
C)a penalty for early withdrawal.
D)a variable rate of return.
E)no minimum deposit amount.

Question 41

Based on the following information,what amount would be subtracted from the bank statement side of the checking account reconciliation? Service charge $12; Outstanding checks $145; Interest $3.50; Deposit in transit $80.

A)$145.00
B)$12.00
C)$157.00
D)$148.50
E)$80.00

Question 42

Tim Gleason has set up a legal agreement that allows the First State Bank of Orlando to manage funds set aside for his daughter's college education.What type of financial service is Tim using?

A)Payment service
B)Savings service
C)Borrowing service
D)Trust service
E)Asset management

Question 43

Neil Guest writes a check to pay for day care for his son.What type of financial service is Neil using?

A)Payment service
B)Savings service
C)Borrowing service
D)Trust service
E)Investment management

Question 44

When preparing a bank reconciliation,outstanding checks should be:

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the checkbook balance.
D)subtracted from the checkbook balance.
E)ignored until they have cleared.

Question 45

A ____________ endorsement would be used if a person is presenting a check in order to obtain cash.

A)restrictive
B)common
C)special
D)blank
E)documented

Question 46

Which of the following is a drawback of a money market fund from an investment company?

A)Penalty if money is withdrawn early
B)Lower rate of interest if redeemed within the first five years
C)Minimum required holding period
D)Not covered by FDIC insurance
E)Taxed at a higher rate than other investments

Question 47

Which of the following institutions makes loans based on the value of tangibles possessions,such as jewelry and other valuables?

A)Life insurance company
B)Finance company
C)Mortgage company
D)Pawnshop
E)Investment company

Question 48

In the bank reconciliation process,total fees should be:

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the checkbook balance.
D)subtracted from the checkbook balance.
E)ignored.

Question 49

Which of the following is a user-owned,nonprofit,cooperative financial institution?

A)Life insurance company
B)Investment company
C)Mortgage company
D)Pawnshop
E)Credit union

Question 50

David Wynn gets an auto loan from his credit union for $10,000.David will make monthly payments over the next four years to repay the loan.What type of financial service is David using?

A)Payment service
B)Savings service
C)Credit service
D)Trust service
E)Asset management

Question 51

Which of the following doesnot offer deposit services?

A)Life insurance company
B)Commercial bank
C)Savings and loan association
D)Credit union
E)Mutual savings bank

Question 52

What is the rate an individual will pay to borrow for the purchase of a new home called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 53

A _______ endorsement is especially useful when you are depositing checks.

A)blank
B)restrictive
C)common
D)special
E)documented

Question 54

What is the term used to refer to the yield on a long term bond issued by the U.S.government?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 55

What is the rate that banks charge large corporations for loans called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 56

The purpose of a "special endorsement" is to:

A)cash a check.
B)deposit a check.
C)transfer a check to another person.
D)withdraw cash from your account.
E)reduce the charge for service fees.

Question 57

Which of the following institutions is organized primarily to provide loans to purchase homes?

A)Life insurance company
B)Finance company
C)Mortgage company
D)Pawnshop
E)Investment company

Question 58

Nate Rogers deposited $5,000 in a 3-year bank certificate of deposit which pays six percent interest.What type of financial service is Nate using?

A)Payment service
B)Savings service
C)Borrowing service
D)Trust service
E)Budget counseling

Question 59

A personal check with guaranteed payment is called a:

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

Question 60

What is the rate that the Federal Reserve banks charge financial institutions for loans called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 61

Series EE U.S.Savings Bonds can be purchased:

A)for less than $25.
B)for any amount greater than $25.
C)for less than face value.
D)in increments of $25 only.
E)in whole dollar amounts only.

Question 62

Which type of organization does not provide home mortgages?

A)Federal credit unions
B)Savings and loan associations
C)Employee credit unions
D)Mutual savings banks
E)Check-cashing outlets

Question 63

Purchasing a new CD upon maturity of the current CD is commonly referred to as:

A)creating a CD portfolio.
B)rolling over.
C)refinancing.
D)calling a CD.
E)bumping up.

Question 64

Which CD attempts to attract savers with gifts or special rates?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 65

What type of account would be considered the most liquid?

A)Certificate of deposit
B)Regular savings account
C)Money market account
D)U.S.savings bond
E)Share of stock

Question 66

Your bank statement shows a balance of $670.Your checkbook register shows a balance of $462.You earned interest of $2 and had a service charge of $4.There are no outstanding deposits.What is the amount of outstanding checks?

A)$210
B)$208
C)$180
D)$12
E)$6

Question 67

What type of account would you expect to provide the poorest yield?

A)Certificate of deposit earning 3% compounded semiannually
B)Savings account earning 3% compounded annually
C)Money market account earning 3% compounded monthly
D)Money market fund earning 3% compounded monthly
E)Savings account earning 3% compounded semiannually

Question 68

Which CD pays earnings based on the stock market?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 69

Which of the following represent the use of credit?

A)Demand deposits
B)Mortgage
C)ATM withdrawals
D)Time deposits
E)Debit card

Question 70

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $200,000 in an individual account and $424,000 in a joint account with her husband,Ted.How much of Suzanne's money is notcovered by FDIC insurance?

A)$162,000
B)$174,000
C)$374,000
D)$50,000
E)$0

Question 71

Determine the rate of return on a savings account in which you deposited $300.00 and earned $6.00 in interest after one year.

A)5.00%
B)0.05%
C)2.00%
D)0.20%
E)18.00%

Question 72

Which law requires banks and other financial institutions to disclose fees,the interest rate,the annual percentage yield,and the other terms and conditions on savings account plans?

A)Truth in Savings Law
B)Truth in Lending Law
C)Expedited Funds Availability Act
D)Equal Employment Opportunity Act
E)Identity Theft Protection Act

Question 73

A pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____ percent.Ignore compounding.

A)33.00
B)27.50
C)20.00
D)5.50
E)2.75

Question 74

A savings account earns 4 percent.If the saver is in a 28 percent tax bracket,the after-tax savings rate of return would be ____percent.

A)28.00
B)16.72
C)4.00
D)2.88
E)1.12

Question 75

Sue deposited $1,000 in an account paying 3 percent interest.The inflation rate is 5 percent.What is the buying power of the account after one year?

A)$1,050
B)$1,030
C)$1,000
D)$980
E)$950

Question 76

Which CD starts with a higher rate,has a long time to maturity,and can be retired by the bank after a set time period?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 77

Which is a CD that offers a higher rate for every six months you are invested?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 78

Which of the following types of financial institutions provide Federal Deposit Insurance coverage?

A)Credit card companies and finance companies
B)Credit unions and brokerage firms
C)Mortgage companies, commercial banks, and credit unions
D)Commercial banks, credit unions, and savings and loans
E)Commercial banks, credit card companies, and credit unions

Question 79

Which of the following is a way to reduce ATM surcharges?

A)Withdraw larger amounts rather than making several smaller withdrawals.
B)Withdraw the minimum amount each time you withdraw.
C)Withdraw from ATMs based on their proximity to your home or place of business regardless of which bank services the ATM.
D)Withdraw from ATMs that can be used by customers from many different banks.
E)Make a separate withdrawal for each purchase to maintain a record of your spending.

Question 80

A person borrows $200 from a payday loan company,and pays $10 interest for two weeks.This would result in an annual interest rate of approximately ___ percent.Ignore compounding.

A)260
B)130
C)40
D)20
E)5