Deck 5: Banking Services and Managing Your Money

Question 1

Credit unions are non-profit depository institutions that serve members who have a common affiliation (such as the same employer or same community).

Answer 1

True

Question 2

Bank ABM charges may be substantial if you make many transactions monthly at an ABM machine that is not sponsored by your bank.

Answer 2

True

Question 3

Securities firms primarily sell insurance to protect individuals from adverse events.

Answer 3

False

Question 4

Bank fees for the use of an automatic banking machine (ABM)are not usually a large consideration in choosing a bank with which to do business.

Question 5

A debit card differs from a credit card in that it does not provide credit; instead, it deducts the purchase from your chequing account immediately.

Question 6

In order to have a safety deposit box at a bank, a person needs to also maintain another chequing or savings account at that bank.

Question 7

Finance companies are more selective in choosing the borrower they serve, and therefore usually charge lower interest rates than banks or credit unions.

Question 8

Savings institutions differ from commercial banks in that they tend to focus less on providing commercial loans.

Question 9

Convenience, deposit rates and insurance, and fees are the primary considerations in choosing a financial institution for your needs.

Question 10

Depository institutions are financial institutions that accept deposits (that are insured up to a maximum level)from individuals or firms and provide loans.

Question 11

Deposits in commercial banks that are members of the CDIC are insured up to a maximum of $50 000 per account.

Question 12

You can be assured that if your ABM query shows you have a certain balance in your chequing account, that figure is more accurate than the amount in your cheque register.

Question 13

To prevent an overdraft or "bounced cheque," it is always a good idea to record your cheques written in your cheque register and reconcile your account balance when you receive your monthly bank statement.

Question 14

Certified cheques, money orders, and traveller's cheques are secured cheque alternatives to a personal cheque and therefore are more risk-free for the payee.

Question 15

Introductory high interest rates paid by financial institutions for new accounts are usually a good deal and you should therefore take advantage of them without question.

Question 16

A mutual fund is a means by which investors with only a small amount of money can invest in a portfolio of securities.

Question 17

Debit cards allow you to pay for a purchase later when the bill arrives.

Question 18

An example of a depository financial institution is an insurance company.

Question 19

ABM cards are declining in use because they are expensive and the machines are becoming more difficult to locate.

Question 20

Non-depository institutions are financial institutions that provide various financial services, but their deposits are not CDIC insured.

Question 21

A GIC that is not cashable for five years will pay a higher rate than a GIC that has a five-year term but is cashable at any time.

Question 22

Banks always pay more interest on chequing deposits than they do on savings accounts deposits.

Question 23

The one-year loan rate for individuals is usually about the same as the one-year GIC rate.

Question 24

You should select only one financial institution for all of your chequing, savings, and investing needs.

Question 25

You are charged for writing an NSF cheque; the person you made the cheque payable to is not.

Question 26

Funds set aside for an emergency fund can be invested for short to medium terms in a money market fund.

Question 27

Since rates and fees differ only slightly between all national banks, there is little need to consider these when choosing your financial institution.

Question 28

Stockbrokers make markets to put together eager buyers and sellers of securities.

Question 29

It is illegal for a federally insured financial institution to charge those with poor credit higher interest rates than those with good credit.

Question 30

Guaranteed investment certificates (GICs)with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates.

Question 31

Credit unions may be a good choice for your bank because they are non-profit, provincially incorporated institutions owned by those who use them.

Question 32

Mutual fund dealers sell units of a prepackaged collection of investments with varying degrees of risk.

Question 33

Interest rates charged on credit cards can range from 8 percent to 24 percent.

Question 34

Investment dealers sell insurance to protect individuals and assets from risk.

Question 35

Mutual fund investments such as a money market fund are guaranteed by the CDIC.

Question 36

There is no real difference between the rates paid to you on savings accounts by all of the large banks, such as RBC Financial, CIBC, and BMO Group.

Question 37

Because they have lower expenses, Web-based financial institutions tend to pay higher interest rates on deposits than institutions with physical branches.

Question 38

Investments with a higher risk of default pay higher rates of interest than those that are less risky.

Question 39

The difference between a bank and a trust company is that the trust company can provide estate planning and administrative services.

Question 40

A guaranteed investment certificate guarantees or locks in an interest rate for a specified time and rate.

Question 41

Financial institutions that accept deposits (that are insured)from individuals and provide loans are called

A)finance companies.
B)depository institutions.
C)investment companies.
D)deposit clearing corporations.

Question 42

The time between writing a cheque and when the bank deducts the money from your account is called "the float."

Question 43

Web-based banks may charge less in fees but also pay less interest on deposits because they have no branch expenses.

Question 44

Debit cards are more likely to be accepted by merchants than a certified cheque.

Question 45

A bank does not charge a penalty for cashing in a five-year uncashable GIC early.

Question 46

Which of the following is a non-profit depository institution that provides services only to members who have a common affiliation?

A)RBC Financial Group
B)Scotiabank
C)Farmer's Credit Union
D)National Mortgage Alliance

Question 47

Which of the following financial institutions specializes in making personal loans to people who are perceived to have a higher risk of default?

A)Finance company
B)Commercial bank
C)Savings institution
D)Credit union

Question 48

If you were taking out a personal loan, the highest rate would probably be charged by a

A)commercial bank.
B)finance company.
C)member of your family.
D)credit union.

Question 49

Which of the following companies would help to administer your will?

A)HSBC
B)Canada Trust
C)CIBC
D)Ontario Teacher's Credit Union

Question 50

Overdraft protection allows a bank customer to write a cheque without sufficient funds in the account.

Question 51

You should have more funds in your chequing account than you need.

Question 52

The bank who sponsors an ABM machine will charge a service fee, as will the bank that you are withdrawing the money from, resulting in two separate bank charges.

Question 53

Which of the following is a non-depository financial institution?

A)Credit union
B)Trust company
C)Pawn shop
D)Caisse populaire

Question 54

Some banks require a minimum deposit of $1000 or more before they pay any interest.

Question 55

Which of the following is a depository institution?

A)Nesbitt Burns Investment Dealer
B)Bank of Nova Scotia
C)CIBC World Markets
D)Sun Life Assurance

Question 56

Financial institutions loan funds at

A)lower interest rates than depositors receive.
B)higher interest rates than depositors receive.
C)rates equal to what savers receive.
D)cost plus 3 percent of the rate on GICs.

Question 57

The average term of debt held in a money market fund (MMF)is 90 days, making an MMF a safe place to invest short-term funds.

Question 58

To join a credit union, you need to

A)have a steady job.
B)be a member of a group with a common bond.
C)have established a good credit rating.
D)All of the above.

Question 59

A good reason my cheque register may not be in balance with my bank statement is that I did not account for bank charges.

Question 60

The Canada Deposit Insurance Corporation (CDIC)insures deposits at chartered banks up to

A)$50 000.
B)$75 000.
C)$100 000.
D)$150 000.

Question 61

Which of the following will not vary at a chartered bank?

A)Interest rates on similar GICs
B)CDIC insurance amounts on accounts
C)Interest rates charged on mortgages
D)Service fees charged to different customers

Question 62

Which of the following would be least important in selecting a financial institution?

A)Convenience of the branches
B)Whether it has a provincial or federal charter
C)Deposit rates and insurance
D)Fees

Question 63

Non-depository institutions that provide insurance to protect individuals or firms against possible adverse events are called

A)finance companies.
B)securities firms.
C)insurance companies.
D)investment companies.

Question 64

Which of the following is an advantage of using a debit card?

A)Your total banking expenses are likely to be lower.
B)The overdraft protection is less expensive than borrowing from your credit card.
C)They have lower transaction fees than credit cards.
D)You have no risk of being charged for insufficient funds.

Question 65

You are closing the purchase of a new home and your closing costs, including down payment, are $30 500. What form of payment would the lawyer require?

A)Personal cheque
B)Money order
C)Certified cheque
D)Traveller's cheque

Question 66

Which of the following does not guarantee payment to the payee?

A)Certified cheque
B)Money order
C)Traveller's cheque
D)Personal cheque

Question 67

A type of cheque that is written on behalf of an individual and will be charged against a large well-known financial institution or credit card sponsor's account, but has no payee designated on the cheque is called a

A)cashier's cheque.
B)money order.
C)traveller's cheque.
D)personal cheque.

Question 68

Which of the following is classified as a non-depository institution?

A)Credit union
B)Insurance company
C)Commercial bank
D)Savings and loan

Question 69

Which of the following is a Schedule II chartered bank?

A)National Bank
B)Citibank
C)HSBC
D)Scotiabank

Question 70

Which of the following is a disadvantage of using debits cards over credit cards?

A)The record of the transaction shows up on your bank statement.
B)Higher interest rates than for credit cards.
C)You cannot tell if your bank account will become overdrawn.
D)The fees can become significant.

Question 71

Which would be the least effective way to manage expenses when travelling internationally?

A)Credit cards
B)Money order
C)Traveller's cheques
D)Debit card

Question 72

Which of the following is true regarding guaranteed investment certificates (GICs)?

A)The longer the term, the lower the interest rate paid.
B)All banks offer the same rates on GICs.
C)Early withdrawals of money are not subject to a penalty.
D)The investment of large amounts will pay higher interest than lower amounts.

Question 73

If you have $10 000 that you do not expect to need for expenses in the next few years and you wish to put it somewhere so that it will earn a return, which of the following financial institutions would be the best option?

A)A bank
B)A mutual fund company
C)A credit union
D)Any of the above

Question 74

The type of financing that allows you to pay for a purchase directly from your chequing account without writing a cheque is

A)a credit card.
B)a debit card.
C)an expense account.
D)travel points.

Question 75

Wanda Clark expects interest rates to decline in the next few months. Which of the following options would most likely give her the best return?

A)A two-year uncashable GIC
B)A six-month guaranteed investment certificate
C)A money market account.
D)A high interest savings account.

Question 76

You have $3,000 that you may need any day to replace the furnace in your house. Which of the following would be the best place to put the $3000?

A)A one-year fixed-rate GIC earning 4 percent
B)A common stock mutual fund earning 9 percent
C)A savings account earning 2 percent
D)An ETF earning 5 percent

Question 77

The type of financing that allows you to pay for a purchase at a later time when the bill arrives is

A)a credit card.
B)a debit card.
C)an expense account.
D)an ABM statement.

Question 78

Rashid's monthly expenses are $4000 and he expects that his cash flow will always be sufficient to cover his expenses. How much should he ideally have in his emergency fund?

A)$12 000 using a combination of liquid investments and access to credit.
B)$24 000 because it is always best to be safe.
C)None, but he needs a $24 000 limit on his credit card.
D)$12,000 invested in two to three year GICs to get a higher return.

Question 79

A financial conglomerate offers a diverse set of products and services that include which of the following?

A)A brand name credit card
B)Mutual funds
C)Brokerage services
D)All of the above

Question 80

Institutions that facilitate the purchase or sale of securities by firms or individuals by providing investment banking services and brokerage services are called

A)finance companies.
B)investment dealers.
C)insurance companies.
D)mortgage companies.