Question 1

Having your pay sent directly to your bank rather than receiving a written check is a type of

Accepted Answer

Direct deposit is the process of having your pay sent electronically to your bank account instead of receiving a physical check. This reduces the risk of lost or stolen checks and allows for faster access to your funds. Shared accounting, check cancellation, and NOW accounts are not related to direct deposit.

Question 2

A customer who wanted to directly transfer funds from his or her bank account to a retailer's bank account would use a(n)

Accepted Answer

The customer would use an electronic funds transfer (EFT) to directly transfer funds from their bank account to the retailer's bank account. This can be done online, through a mobile app, or through other electronic payment options. Automated teller machines (ATMs) are typically used for cash withdrawals and deposits, not direct transfers to another bank account. Checks and credit cards are not direct transfers and involve intermediaries such as a processor or financial institution.

Question 3

Absent-minded Alfred lost his debit card on May 1.He reported it missing the next day; however,$600 had been already purchased with the card without the use of his PIN number.According to the Electronic Funds Transfer Act,how much of this $600 loss is Alfred responsible for?

Accepted Answer

According to the Electronic Funds Transfer Act, if a customer reports the loss or theft of their debit card within two business days of discovering the loss, they are not liable for any unauthorized transactions. In this case, Alfred reported the loss the day after he discovered it, which is within two business days. Therefore, he is only responsible for a maximum of $50, regardless of the amount spent on the card without his PIN. Hence, the correct answer is B.

Question 4

Because certificates of deposit require that the deposited funds remain on deposit for a specified period of time they are subject to

Accepted Answer

Certificates of deposit (CDs) usually have a fixed maturity date and a fixed interest rate. This means that if interest rates in the broader economy rise, the interest rates offered on new CDs may also rise, making older CDs less attractive. This results in the interest rate risk for the investor who may be stuck earning a lower interest rate. Additionally, if the investor needs to access the funds before the maturity date, they may suffer a penalty which is also an example of interest rate risk.

Question 5

Which type of cash management instrument could also be used by a college student to access his or her meal plan?

Accepted Answer

A stored-value card, also known as prepaid card, allows the user to load a certain amount of money onto the card and then use it for purchases at designated locations. This type of cash management instrument is commonly used for meal plans on college campuses, as students can load their funds onto their card and use it at dining halls and campus restaurants. Credit cards and debit cards are not typically linked to meal plans, and while a debit card can be used for purchases, it is not as convenient for tracking and managing a specific expense like a meal plan.

Question 6

To reduce interest rate risk and smooth out interest rate fluctuations when purchasing certificates of deposit (CDs) you can engage in

Accepted Answer

CD laddering involves purchasing multiple CDs with staggered maturity dates. This helps to reduce interest rate risk because the investor can reinvest a portion of their portfolio at different times, potentially taking advantage of higher interest rates, rather than having to reinvest all of their funds at once and potentially being subjected to lower interest rates. CD layering and grace period management are not common strategies for reducing interest rate risk, and money-market arbitrage is a strategy for taking advantage of differences in interest rates between different financial instruments, rather than reducing risk.

Question 7

A ______ is a firm that notifies all companies with which you have debit and credit cards in the event that the cards are lost.

Accepted Answer

A card registration service notifies all companies with whom you have debit and credit cards in the event that the cards are lost or stolen, providing an extra level of security and protection for your financial accounts.

Question 8

Which of the following might be used by an employer to pay an employee?

Accepted Answer

Preloaded debit cards are typically used by employers to pay employees. These cards are linked to a specific amount of money that has been preloaded onto the card by the employer. They function like a regular debit card and can be used to withdraw cash or make purchases. ATM cards and stored-value cards are not typically used for payroll purposes, and while prepaid cards may be used for payroll, they are generally not as secure or regulated as preloaded debit cards.

Question 9

Which of the following is not a technique for reducing the risk whenever you conduct banking transactions on-line?

Accepted Answer

Leaving the browser window open after conducting banking transactions on-line increases the risk of unauthorized access to your account. You should always log out completely and close the browser window when finished with your transaction.

Question 10

A POS terminal is an electronic computer terminal located at a store or other merchant location that allows the customer to

Accepted Answer

A POS terminal allows customers to make purchases using a debit or credit card, but it does not typically facilitate personal check use, cash withdrawals, or cash advances.

Question 11

Which of the following ideas will not help you discuss money with more confidence and candor?

Accepted Answer

Making it clear that your needs and wants are more important than your spouse's will negatively impact the conversation and could lead to conflicts. Money discussions should focus on finding common ground and mutually beneficial solutions, rather than prioritizing one person's needs over the other.

Question 12

Amy and Lance are newlyweds.This is Lance's second marriage.Because of problems that occurred before his divorce (his ex-wife took all the money out of their joint accounts),he is more cautious than most about setting up joint accounts.Which type of account would you recommend for Amy and Lance?

Accepted Answer

Tenancy by the entirety is specifically designed for married couples and offers protection against creditors of one spouse, which can provide the security Lance is seeking after his previous experience.

Question 13

A personal identification number (PIN) is required when using a(n)

Accepted Answer

Both automated teller machines and point-of-sale terminals require a PIN to be used, so the best choice is D, which includes both options. Stored-value cards may also require a PIN depending on the type of card, but this is not always the case.

Question 14

Andy and Marjorie have very little will power when it comes to spending.They want to put their savings in an instrument that cannot be accessed by their ATM card.Which instrument would meet this criterion?

Accepted Answer

The answer of Andy and Marjorie have very little will...

Question 15

Electronic funds transfers (EFTs)

Accepted Answer

Electronic funds transfers (EFTs) can transfer funds electronically, can be used in place of checks, and are paperless. Therefore, all of these options are correct.

Question 16

The primary reason for giving a child an allowance is to

Accepted Answer

The primary reason for giving a child an allowance is to teach the child about how to manage money. Giving an allowance allows children to learn how to budget, save, and make decisions about spending. It also provides an opportunity for parents to teach their children about money management and financial responsibility. While it is possible to tie the allowance to chores or behavior, the main purpose should be to teach financial skills.

Question 17

Your bank will regularly (usually monthly) provide a compilation of your recent account activity,which is called a(n)

Accepted Answer

The correct term for a compilation of recent account activity provided by a bank is a periodic statement. Option A is incorrect as a receipt is a proof of purchase for a particular transaction. Option C is incorrect as reconciliation is the process of checking and matching your account balance with the bank's records. Option D is incorrect as an account ledger is a record of all transactions in a particular account.

Question 18

Which of the following is (are) required to withdraw money from an automated teller machine (ATM)?

Accepted Answer

To withdraw money from an ATM, both an ATM card and a personal identification number are required. Debit cards are typically used as ATM cards, but credit cards cannot be used to withdraw money from an ATM.

Question 19

A personal identification number is not needed for which of the following forms of electronic funds transfers?

Accepted Answer

Direct deposits do not require a personal identification number as they involve a transfer of funds directly into a bank account, without the need for any physical transaction or authorization.

Question 20

Darla had $750 in her checking account when her debit card was stolen.Assuming the thief made $525 in purchases with the card,how much could she save by reporting the stolen ATM card immediately rather than waiting more than three months before reporting the theft?

Accepted Answer

If Darla immediately reports the theft of her debit card, she can prevent any more unauthorized purchases from being made. However, if she waits for more than three months before reporting the theft, the bank may not be obligated to reimburse her for the stolen funds because she failed to report the theft in a timely manner.

Therefore, the amount Darla could save by reporting immediately is equal to the amount of unauthorized purchases made by the thief, which is $525. Thus, the correct choice is C ($475, which is the difference between $750 and $525).

Quiz 5: Managing Checking and Savings Accounts