Question 1

The ________ insures holders of accounts in savings and loan associations.

Accepted Answer

The Savings Association Insurance Fund (SAIF) insures holders of accounts in savings and loan associations. The other options listed are not actual agencies or corporations.

Question 2

Originally, savings and loan associations

Accepted Answer

Savings and loan associations were originally created to promote consumer thrift and home ownership by providing affordable loans for mortgages and other housing-related expenses.

Question 3

A time deposit that earns interest is a

Accepted Answer

A certificate of deposit (CD) is a time deposit that earns interest at a fixed rate for a specified period of time. It generally offers higher interest rates than other savings accounts, but you cannot withdraw the money before the term is up without penalty.

Question 4

________ represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members.

Accepted Answer

Pension funds represent money set aside by corporations, nonprofit organizations, or unions to cover part of the retirement needs of their members. Annuity accounts and individual retirement accounts are types of retirement accounts for individuals, not established by organizations. Term-life retirement funds are not a common term or financial product.

Question 5

Ryan works at a community college and the college requires all employees to contribute to a pension fund. At this time, he is not too worried about the safety of this contribution because

Accepted Answer

The best choice is D because pension funds usually make conservative investments, which means they are less likely to lose money and are generally considered safe for contributors. Option A is not entirely accurate as pension funds' investments are not always backed by the U.S. government. Option B is also inaccurate as nonbanks may invest in risky assets, and even banks have stringent rules to follow when it comes to pension funds' investments. Option C is not entirely accurate as state employees are not always protected if a pension fund goes bankrupt.

Question 6

Nora is an investment specialist for the Teamsters Union Central States Pension Fund. Her job involves deciding how to invest the contributions paid into the fund. Which of the following statements about Nora's job are true?

Accepted Answer

Nora's job involves investing contributions from the Teamsters Union Central States Pension Fund. Her goal is to make sound investments that will protect and grow the value of the fund, so that it can continue to provide retirement income to union members. This means that Nora will likely invest in safe corporate stocks and other conservative investments, such as government securities, in order to minimize risk and ensure the long-term stability of the fund. Option A is incorrect because Nora does not work for a bank, but rather for the pension fund. Option C is also incorrect because the sources of the contributions do not affect the tax benefits of the investments made. Option D is incorrect because the purpose of the investments is not to increase the current pay of union members, but rather to secure retirement income.

Question 7

Commercial banks, savings and loan associations, and credit unions

Accepted Answer

Commercial banks, savings and loan associations, and credit unions accept deposits and make loans. They are financial intermediaries that utilize the funds deposited by their customers to provide loans to borrowers.

Question 8

Traditionally, life insurance companies, pension funds, and brokerage firms are known as

Accepted Answer

Life insurance companies, pension funds, and brokerage firms are not banks and therefore fall under the category of nonbanks.

Question 9

A(n) ________ accepts savings and checking account deposits and provides home mortgage loans.

Accepted Answer

Savings and loan associations specialize in accepting savings and checking account deposits and providing home mortgage loans. Nonbanks, insurance companies, and commercial finance companies may offer some financial services, but they do not primarily focus on these activities.

Question 10

How did banks contribute to the recent financial crisis?

Accepted Answer

Banks contributed to the financial crisis by making risky loans and then creating mortgage-backed securities from the assets they held. These securities were then sold to investors, spreading the risk throughout the financial system. When the housing market collapsed, many of these assets became worthless, causing significant losses for banks and investors.

Question 11

Which of the following represent an independent agency of the U.S. government that insures bank deposits?

Accepted Answer

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the U.S. government that provides deposit insurance to protect depositors in case a bank fails. The other options listed are not actual agencies or organizations.

Question 12

The ________ insures deposits held in credit unions.

Accepted Answer

The National Credit Union Administration (NCUA) insures deposits held in credit unions. The Federal Credit Insurance Agency (FCIA) and Credit Union Insurance Fund (CUIF) do not exist. The Federal Deposit Insurance Corporation (FDIC) insures deposits held in banks, not credit unions.

Question 13

Traditionally, banks provide loans to individuals and companies according to the recipient's

Accepted Answer

Banks provide loans based on the creditworthiness of the borrower, which reflects their ability to repay the loan based on their credit history, income, and other factors. Future earnings potential and family history are not commonly used as criteria for loan approval, while the volume of credit already established may impact the borrower's creditworthiness, but is not the sole determining factor.

Question 14

Which of the following represents a nonbank?

Accepted Answer

Life insurance companies are not banks or financial institutions that engage in banking activities such as accepting deposits or making loans. They provide life insurance policies and related services.

Question 15

The technical name for a savings account is a

Accepted Answer

The answer of The technical name for a savings account...

Question 16

Anthony would like to have his brokerage firm handle more of his financial needs because he has been pleased with the service provided when he bought and sold stocks and bonds. If he explores the services offered by such firms in more depth, he will find that

Accepted Answer

Brokerage firms are expanding their services beyond just buying and selling securities and are becoming more competitive with banks by offering a variety of high-yield banking products and loans. Federal law doesn't prohibit individuals from holding both a checking account and a securities account with the same firm.

Question 17

Designed to create more confidence in banking institutions, the FDIC was established

Accepted Answer

The answer of Designed to create more confidence in banking...

Question 18

________ are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans.

Accepted Answer

Credit unions are nonprofit, member-owned financial cooperatives that offer a full variety of banking services such as accepting deposits and making loans. Mutual thrift associations are also financial cooperatives, but they are not necessarily owned by their members. Commercial banks are for-profit financial institutions. Mutual fund companies are investment companies that pool money from many investors to purchase securities.

Question 19

Savings and loan associations are sometimes known as

Accepted Answer

Savings and loan associations are commonly known as thrift institutions because their primary purpose is to promote thrift and homeownership.

Question 20

Wyatt keeps $25,000 in an interest-bearing time deposit with the Bigbux Bank. While earning a relatively attractive rate of interest, Wyatt had to agree to not withdraw any of the funds until the end of a three-year period. Wyatt's investment represents a(n)

Accepted Answer

Wyatt's investment represents a certificate of deposit (CD) as he deposited a large amount of money with a bank and agreed not to withdraw it until the end of a specific period in exchange for a relatively attractive rate of interest.

Quiz 20: Money, Financial Institutions, and the Federal Reserve