Question 1

Certificates of deposit can be purchased only at banks,savings and loan associations,and credit unions.

Accepted Answer

False

Question 2

Credit unions typically pay higher rates of return on savings than banks and savings and loan associations.

Accepted Answer

Credit unions are known for offering higher rates on savings accounts compared to traditional financial institutions such as banks and savings and loan associations. This is because credit unions are member-owned and not-for-profit, and their earnings are returned to members in the form of lower fees, better rates, and other benefits.

Question 3

Asset management accounts are protected by the Federal Deposit Insurance Corporation.

Accepted Answer

Asset management accounts are not protected by the Federal Deposit Insurance Corporation (FDIC). FDIC provides insurance for traditional bank accounts such as checking and savings accounts, but investment accounts such as asset management accounts are not covered by FDIC insurance.

Question 4

S&Ls represent the largest segment of the financial institutions industry.

Accepted Answer

According to current data, commercial banks represent the largest segment of the financial institutions industry, followed by credit unions and then S&Ls.

Question 5

A passbook savings account may be a useful tool in managing everyday household transactions.

Accepted Answer

A passbook savings account is typically used for saving money rather than managing everyday transactions, which are better suited for checking accounts.

Question 6

There is a penalty for early withdrawal of funds from CDs purchased from brokerage firms.

Accepted Answer

The answer of There is a penalty for early withdrawal...

Question 7

Specialization within the financial institutions industry continues to increase.

Accepted Answer

The answer of Specialization within the financial institutions industry continues...

Question 8

The main business of an S&L is to provide home mortgage and home improvement loans.

Accepted Answer

S&Ls, or savings and loan associations, traditionally specialize in providing financing for home mortgages and home improvement loans.

Question 9

One can avoid early withdrawal penalties on CDs by purchasing them through brokerage firms.

Accepted Answer

Brokerage firms offer CDs that have no early withdrawal penalties or offer some flexibility in withdrawing funds early. This is known as a "no-penalty CD." It is important to read the terms and conditions of the CD before investing to ensure that there are no penalties for early withdrawals.

Question 10

The rate of return on liquid assets is relatively high compared to other types of investments.

Accepted Answer

The rate of return on liquid assets, such as savings accounts or short-term bonds, is generally low compared to more long-term investments like stocks or real estate.

Question 11

NOW accounts are appropriate for people who need to keep substantial amounts of money in a checking account.

Accepted Answer

NOW accounts (Negotiable Order of Withdrawal) typically offer higher interest rates than traditional checking accounts, making them suitable for individuals with high account balances who want to earn more interest while maintaining liquidity.

Question 12

Another term for the interest paid by credit unions on deposits is dividends.

Accepted Answer

Credit unions often refer to the interest paid on deposits as dividends since members of a credit union are technically also owners of the institution and may receive a portion of profits (in the form of dividends) at the end of the year.

Question 13

Asset management accounts combine many cash management services into one account.

Accepted Answer

Asset management accounts typically provide a range of cash management services such as check writing, debit cards, electronic funds transfers, and more, all consolidated within one account.

Question 14

Money market mutual funds are insured up to $250,000 by the FDIC if purchased at an insured bank.

Accepted Answer

Money market mutual funds are not insured by the FDIC. They are considered investments and are subject to their own risks and potential losses.

Question 15

There are some limitations on check writing for both MMDAs and MMMFs.

Accepted Answer

Both MMDAs and MMMFs typically have limits on the number of checks that can be written per statement cycle, as well as minimum amounts for individual checks. Additionally, some MMMFs may only allow checks to be written to certain types of accounts or for specific purposes.

Question 16

Savings and loan associations (S & Ls)channel the savings of depositors primarily into automotive loans.

Accepted Answer

Savings and loan associations (S & Ls) channel the savings of depositors primarily into mortgages and home loans, not automotive loans.

Question 17

One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.

Accepted Answer

This is true because a certificate of deposit requires that the funds be deposited for a set period of time with limited access, so the bank can offer a higher interest rate as an incentive to keep the funds in the account. A checking account, on the other hand, offers unlimited access to funds and therefore typically has a lower interest rate.

Question 18

Saving accounts are sometimes referred to as demand deposits.

Accepted Answer

Savings accounts are not demand deposits as customers cannot withdraw money on demand like they can with a checking account. Savings accounts usually have limits on the number of withdrawals per month and may require a minimum balance to be maintained to avoid fees. Demand deposits are accounts that allow for unlimited withdrawals and do not usually earn interest.

Question 19

Money market deposit accounts are insured by the FDIC if purchased at an insured bank.

Accepted Answer

Money market deposit accounts are considered deposits and are insured by the FDIC if purchased at an insured bank.

Question 20

FDIC covers stocks,bonds,and mutual funds purchased at banks.

Accepted Answer

FDIC covers deposit accounts such as checking and savings accounts, but not stocks, bonds, or mutual funds purchased at banks.

Quiz 4: Managing Your Cash and Savings