Deck 3: Financial Instruments and Institutions

Question 1

Tristan is a freshman in high school in a very low tax bracket and is looking for a way to save money for retirement (yes… It is never too early to start!).What strategy would be best for him to use?

A)529 plan
B)CD
C)Roth IRA
D)401(k)

Answer 1

Roth IRA

Question 2

What are 529 plans?

A)Qualified tuition plans
B)Prepaid tuition plans
C)College savings plans
D)Both prepaid tuition plans and college savings plans

Answer 2

Both prepaid tuition plans and college savings plans

Question 3

In what life stage should you start an IRA?

A)Dependent life stage
B)Independent life stage
C)Early family life stage
D)Empty nest life stage

Answer 3

Independent life stage

Question 4

In which life stage do you usually get a 529 plan?

A)Independent
B)Empty nest
C)Dependent
D)Adolescent

Question 5

Which of the following are reasons for putting money into a CD (certificate of deposit)?

A)To earn a higher rate of interest on your savings than would typically be earned if savings were placed in one's checking account or standard savings account
B)To establish a solid savings foundation if you are not going to use the money for a longer period of time
C)To have a safe place to store savings while still being able to make frequent withdrawals from the account penalty-free
D)Both to earn more interest and to put money you don't plan to use in the short-term to work

Question 6

With a credit union account you earn

A)interest.
B)dividends.
C)capital gains.
D)equity income.

Question 7

Which of the following does a person not normally have in his or her dependent life stage?

A)529 college savings plans
B)Savings account
C)Checking account
D)Certificates of deposit

Question 8

All 50 states and the District of Columbia sponsor at least one type of this savings,which is when funds are set aside to go toward post-secondary education expenses.

A)Certificate of deposit
B)529 plan
C)Savings bonds
D)401(k)plan

Question 9

What is a savings account designed for?

A)Spending money
B)Counting money
C)Saving money
D)Investing money

Question 10

A 529 plan is

A)funds set aside to go toward post-secondary education expenses.
B)an account which allows the holder to write checks against deposited funds.
C)funds set aside to be withdrawn after age 59.5 without penalty.
D)a plan where taxes are not paid on the money or interest earned until the year it is withdrawn.

Question 11

Which best defines a 529 plan?

A)An account that is designed to help finance future college expenses.
B)A time deposit account where the depositor agrees on a time period and sum of money.
C)An account that allows the holder to write checks against funds deposited in the account.
D)Funds set aside to be withdrawn after the age of 59.5 without penalty.

Question 12

A prepaid tuition plan does not include

A)locking into prices at eligible and public and private colleges and universities.
B)state plans guaranteed or backed by the state.
C)age/grade limits for the beneficiary.
D)open enrollment all year.

Question 13

Which of the following is not included in the dependent life stage?

A)Certificate of deposit
B)College savings plan
C)Student loans
D)Savings account

Question 14

When opening a savings account it is important to consider

A)APY.
B)minimum balance.
C)fees.
D)all of the options are correct.

Question 15

Accounts that are opened in the dependent life stage include

A)savings.
B)college savings.
C)IRA.
D)both savings and college savings accounts.

Question 16

If you expect your income taxes to be higher when you retire and you are saving for retirement,you should invest in

A)traditional IRA.
B)roth IRA.
C)certificate of deposit.
D)gold.

Question 17

A ________ is an account designed to encourage saving for future college expenses and is legally known as a "qualified tuition plan."

A)CD
B)529 plan
C)roth IRA
D)checking account

Question 18

You can use the money in a 529 plan for all except

A)tuition.
B)transportation to and from college.
C)room and board.
D)books and mandatory fees.

Question 19

A 529 plan is used to save for

A)a car.
B)retirement.
C)a house.
D)college.

Question 20

What plan is also known as a qualified tuition plan?

A)Qualified college savings plan
B)Savings plan
C)529 plan
D)College qualification plan

Question 21

With most auto loans,what is used as collateral?

A)Certificate of deposit
B)Stock
C)The purchased auto
D)No collateral is needed because of your outstanding credit.

Question 22

Internet banking allows you to

A)check the balances in your accounts.
B)deposit checks.
C)deposit cash.
D)all of the options are correct.

Question 23

In the independent life stage,you should open the following account(s):

A)IRA.
B)checking account.
C)overdraft protection.
D)all of the options are correct.

Question 24

Checking account overdraft protection

A)saves you money in overdraft fees.
B)saves your reputation.
C)saves you time.
D)all of the options are correct.

Question 25

At a commercial bank,a checking account is referred to as

A)a demand deposit account.
B)a share draft account.
C)negotiable.
D)a debit account.

Question 26

A negotiable instrument has to include all of the following except

A)specific amount of money.
B)payable to someone or some company.
C)bank's address.
D)the date.

Question 27

Which is not a requirement for a negotiable instrument?

A)Date
B)Payable for a specific amount of money
C)Contains personal information (address,phone number,full name,etc.)
D)Signature by person who owns the account

Question 28

Of the following statements,which one accurately describes what investments are?

A)A foundation for your savings
B)Savings vehicles that provide the same return as certificates of deposit
C)Savings vehicles with no risk
D)A way to have your money grow faster than inflation

Question 29

Debit cards

A)limit fraudulent charges on your card regardless of how quickly you report the charge.
B)build a solid savings foundation.
C)prevent fraudsters from draining your bank account if lost.
D)should be reported lost or stolen within 48 hours to limit your liability.

Question 30

In banking terminology,CD stands for

A)compact disk.
B)cash on deliver.
C)cash deposit.
D)certificate of deposit.

Question 31

You should do all of the following to prevent written checks from being altered except

A)count the number of checks you wrote this month.
B)put a $ sign in front of the amount in the currency box.
C)make a note in the memo line for your own reference.
D)start your written amount on the far left.

Question 32

A checking account at a commercial bank is called a

A)share draft account.
B)negotiable instrument.
C)financial intermediary.
D)demand deposit account.

Question 33

A reverse mortgage

A)allows you to live in your house and have access to the equity.
B)is a fixed rate mortgage.
C)is only available to those 62 years of age and older.
D)allows you to live in your house and have access to equity and is available to those 62 years and older.

Question 34

________ are similar to 401(k)plans as they are both funded with pretax earnings.

A)Roth IRAs
B)Traditional IRAs
C)Certificates of deposit
D)Mutual funds

Question 35

Electronic bill paying allows you to

A)check the balances in your accounts.
B)deposit checks.
C)pay your bills online.
D)all of the options are correct.

Question 36

The difference between a Roth IRA and a traditional IRA is

A)a roth IRA contribution is made after you pay tax on the money you deposit.
B)a traditional IRA contribution is made after you pay tax on the money you deposit.
C)roth IRA contributions are made with pretax money.
D)with a traditional IRA,you never have to pay tax.

Question 37

Certificates of deposit

A)have a minimum opening balance.
B)have a substantial penalty for early withdrawal.
C)have a fixed maturity date.
D)all of the options are correct.

Question 38

Home equity loans use ________ as collateral to secure the loan.

A)an automobile
B)a certificate of deposit
C)the value of your 401(k)
D)your home

Question 39

What is a debit card?

A)A card that carries a credit card logo and is tied to a checking account
B)A card known as a bank card or a cash card that does not include a credit card logo
C)A card that has a minimum line of credit
D)A loan card provided by a bank after being approved by a loan officer

Question 40

Why should you look at your checking account statements?

A)Because your parents taught you to do so
B)To look for possible bank errors
C)To look for possible fraud
D)To look for errors AND to look for fraud

Question 41

If a credit union goes bankrupt,who or what insures that the account will get its money back up to $250,000?

A)FDIC
B)NCUA
C)NCUSIF
D)FSLIC

Question 42

Which is not one of the three major consumer financial institutions?

A)Insurance companies
B)Commercial banks
C)Credit unions
D)Savings institutions

Question 43

Reconciling a checking account is

A)not necessary because the bank never makes a mistake.
B)complicated and difficult to do.
C)not necessary because you can check your balance online and on ATM receipts.
D)something that everyone should do.

Question 44

What are financial intermediaries?

A)They accept money for deposits and then lend the money for a profit.
B)They provide a place to discuss money.
C)They provide a place to think about and consider investments.
D)Wall Street firms

Question 45

Which of the following financial institutions qualify as a financial intermediary?

A)A commercial bank
B)A credit union
C)A savings institution
D)All of the options are correct.

Question 46

Which of the following statements is true regarding interest-bearing checking accounts?

A)There are no penalties for overdrawing your account.
B)To have interest paid on your balance,oftentimes you must meet certain requirements,such as maintaining a high minimum balance,having your paycheck directly deposited into your account,and using your debit card as a credit card a minimum number of times per month.
C)There is no monthly service charge or per-item fee regardless of your balance.
D)You are limited to the number of checks or ATM transactions per month.

Question 47

Which of the following is a difference between commercial banks and credit unions?

A)Commercial banks issue loans while credit unions do not.
B)You must have a credit card to be part of a credit union.
C)Commercial banks have stockholders and credit unions do not.
D)Commercial banks are for people with a common bond.

Question 48

What are the types of checking accounts?

A)Basic checking and free checking
B)New construction draw accounts
C)Interest-bearing checking
D)Basic,free,AND interest-bearing

Question 49

Why is it good to balance your checking account?

A)To check for evidence of identity theft
B)To avoid over-drafting your account
C)To get better at math
D)To check for evidence of identity theft AND to make sure you don't overdraw your account

Question 50

Which criteria would you not use in selecting an institution to bank with?

A)Products and services
B)Square footage of branch location
C)Convenience
D)Costs

Question 51

Where is a checking account referred to as a "share draft account"?

A)Commercial bank
B)Credit union
C)Any bank
D)With your spouse

Question 52

________ were established for people who have a common bond.

A)Commercial bonds
B)Credit bureaus
C)Stockholders
D)Credit unions

Question 53

What is a credit union?

A)A not-for-profit depository institution that serves members who have a common affiliation
B)A financial institution that accepts deposits and uses the funds to provide private business and personal loans
C)A group of workers who pay union dues for credit
D)A place where it snows

Question 54

The FDIC for banks and NCUSIF for credit unions insure savings accounts up to what amount?

A)$50,000
B)$100,000
C)$200,000
D)$250,000

Question 55

Which financial institution would be the best fit for a college-aged student who needs a checking account?

A)Commercial bank
B)Credit union
C)Savings institution
D)All of the options are correct.

Question 56

Which is not a benefit of overdraft protection?

A)Saves you money in overdraft fees
B)Saves your reputation
C)Saves you time
D)Allows you to not have to balance your checking account

Question 57

Which of the following is known as a negotiable instrument?

A)Checks
B)Cash
C)Credit card
D)Debit card

Question 58

What is the advantage of a credit union which allows them to pay you a higher return on deposits ?

A)Being a not-for-profit business
B)Having many locations
C)Having many ATMs
D)Having high-end technology

Question 59

Anna recently opened a savings account and made three deposits in the amounts of $100,000,$65,000,and $200,000.If the Great Depression was to occur again and the bank closed,how much money would Anna be insured for?

A)$365,000
B)$200,000
C)$250,000
D)$100,000

Question 60

To choose the right type of financial instrument,which of the following should you consider?

A)Fees
B)Locations and hours
C)Interest rates
D)All of the options are correct.

Question 61

Elena is a college freshman and needs a checking account.What type of financial institution should she choose?

A)Credit union
B)Commercial bank
C)Savings institution
D)IRS

Question 62

A negotiable instrument is an agreement that must be dated,payable for a specific amount of money,signed by the person who owns the account,and payable to someone or some company.

Question 63

Financial intermediaries accept money for deposits and then lend out the money to make a profit.

Question 64

An example of proper planning is to link your checking account to either your savings account or to a credit card at the same financial institution to prevent costly overdraft fees in the event you inadvertently write a check for more than is in your account.

Question 65

Banks are required by law to send you a statement regarding your checking account.

Question 66

You can use 529 plans to pay for transportation to and from college.

Question 67

Savings accounts are limited by the number of third-party withdrawals.

Question 68

Overdraft fees ________.

A)do not amount to much money
B)cover only the cost to process an overdrawn check
C)are punitive to keep people from overdrawing their account
D)are regulated by the government

Question 69

There are three major types of consumer financial institutions: commercial banks,credit unions,and savings institutions.

Question 70

You must be a resident of the state in which you open a college savings plan.

Question 71

Credit unions are owned by members who make deposits.

Question 72

"Free" checking accounts are always free,with no fees or service charges.

Question 73

With a reverse mortgage,upon the death of the last surviving homeowner,if there is negative equity in the home,the survivors will owe money to the bank.

Question 74

When choosing a financial institution,it is important to consider all of the following except

A)fees and interest rates.
B)locations and hours.
C)accounts offered.
D)all of the options are correct.