Deck 4: Financial Services: Savings Plans and Payment Accounts

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

ATM fees are about the same in different geographic areas.

Question 13

The use of electronic banking does not add to the "float" time for financial services customers.

Question 14

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

Question 15

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

Question 16

Lower returns on savings will usually result in less liquidity.

Question 17

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 18

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

Question 19

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

Question 20

When preparing a bank reconciliation,interest earned on your chequing account is subtracted from the bank statement balance.

Question 21

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 22

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 23

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 24

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 25

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 26

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 27

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 28

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 29

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 30

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 31

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 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

Direct deposit and automatic monthly payments are features of

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

Question 34

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 35

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 36

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 37

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 38

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 39

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 40

Savings compounded ____________ would have the highest effective yield

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

Question 41

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 42

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 43

The first information to be recorded when writing a cheque is the

A)date.
B)cheque stub or cheque register.
C)payee.
D)amount.
E)signature.

Question 44

What are the main types of financial institutions used by consumers?

Question 45

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

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

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)$67
D)$68
E)$266

Question 47

When preparing a bank reconciliation,outstanding cheques should be

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the chequebook balance.
D)subtracted from the chequebook balance.
E)added to direct deposits.

Question 48

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 49

Evan Kostakis is living in this country while going to school.He is not familiar with the operation of savings plans available to consumers.What factors would you recommend that he consider when evaluating and comparing different savings plans?

Question 50

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 51

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 52

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 53

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 54

In the bank reconciliation process,service fees should be

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the chequebook balance.
D)subtracted from the chequebook balance.
E)added to direct deposits.

Question 55

The purpose of a "special" endorsement is to

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

Question 56

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 57

Brad Kellogg maintains a monthly balance in his chequing account of approximately $150,writes about 25 cheques a month,and makes three deposits each month.How would Brad decide which of the following chequing accounts to use?
I.a regular chequing account with a monthly fee of $4.50 for an unlimited number of cheques and no monthly balance required; no interest earned
II.an interest-bearing chequing account paying 4 percent interest on balances over $300; monthly service charge of $6 when the balance is below $300
III.a special chequing account that charges 35 cents a cheque and 20 cents for each deposit; no interest earned
IV.a minimum-balance account that requires a $200 minimum balance to avoid the $10 monthly fee; interest earned when balance is above $400.

Question 58

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 59

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 60

Based on the following information,find the true balance of your chequing account and the sum,if any,of deposits in transit.
Balance on bank statement,$581
Total of outstanding cheques,$200
Service charges,$11
Interest earned on account,$7
Balance in your chequebook,$540