Deck 5: Financial Services: Savings Plans and Payment Accounts

Question 1

A "no-fee" checking account that requires a non-interest-earning minimum balance of $500 has an opportunity cost of lost interest earnings.

Answer 1

True

Question 2

Which of the following statements regarding debit and credit card liability is correct?

A)A credit card carries more risk of loss to the cardholder.
B)A debit card carries more risk of loss to the cardholder.
C)There is no cardholder liability if either type of card is lost.
D)The Federal Government insures losses on credit but not debit cards.
E)The Federal Government insures losses on debit but not credit cards.

Answer 2

A debit card carries more risk of loss to the cardholder.

Question 3

Checking accounts are frequently referred to as ________ deposits.

A)common
B)time
C)current
D)loan
E)demand

Answer 3

demand

Question 4

The storage of funds for future use is a purpose of ________,which include savings accounts and certificates of deposit.

A)trust
B)borrowing
C)credit card
D)time deposits
E)cash checking

Question 5

When interest rates are rising,a person should select:

A)short-term savings instruments.
B)long-term savings instruments.
C)short-term loans.
D)variable-rate loans.
E)five-year certificates of deposit.

Question 6

A regular savings account usually offers a higher rate of return to savers than a certificate of deposit.

Question 7

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions.

Question 8

A certificate of deposit is also known as a demand deposit.

Question 9

A restrictive endorsement on a check to be deposited consists of the words "for deposit only."

Question 10

Time deposits are another name for:

A)checking accounts.
B)loans and charge accounts.
C)savings accounts.
D)government securities.
E)profits earned by a financial institution.

Question 11

A debit card transaction is processed by a retailer,with the amount of purchases deducted from your checking account by:

A)transferring money electronically.
B)obtaining a discount on consumer purchases.
C)making credit card purchases.
D)quickly obtaining a cash loan.
E)making investments with an investment company.

Question 12

Which of the following is organized as a corporation and owned by stockholders?

A)Credit unions
B)Investment companies
C)Mutual savings banks
D)Savings and loan associations
E)Commercial banks

Question 13

Demand deposits are another term for checking accounts.

Question 14

When preparing a bank reconciliation,interest earned on your checking account is added to the bank statement balance.

Question 15

The more frequently the compounding occurs,the less a person will earn on a savings account.

Question 16

An asset management account provides a complete financial services program for a single fee.

Question 17

A trust has the purpose of:

A)solving a person's financial problems.
B)obtaining low-interest loans.
C)handling daily money management activities.
D)managing the assets of a person.
E)improving a person's budgeting skills.

Question 18

An all-purpose account offered by investment brokers that provides a complete financial services program is a(n):

A)NOW account.
B)asset management account.
C)EFT account.
D)mutual fund.
E)money market account.

Question 19

Joan Martin expects interest rates to decline over the next few months.To achieve her long-term financial goals,she will trade off liquidity for a higher return by using a:

A)regular savings account.
B)interest-bearing checking account.
C)five-year certificate of deposit.
D)money market account.
E)money market fund.

Question 20

Using a debit card to make purchases means you are spending your own funds.

Question 21

The Truth in Savings law requires that financial institutions:

A)provide insurance for savings accounts.
B)send customers monthly bank statements.
C)disclose annual percentage yield on savings accounts.
D)offer adjustable rate savings accounts.
E)become members of the Federal Reserve System.

Question 22

In recent years,membership in credit unions has:

A)become more difficult due to higher taxes.
B)become more flexible.
C)been limited to government employees.
D)declined due to poor credit union management.
E)stayed at about the same level.

Question 23

Savers should do which of the following in times of falling interest rates?

A)Use long-term loans to take advantage of current low rates.
B)Use short-term loans to take advantage of lower rates when you refinance the loans.
C)Select short-term savings instruments to take advantage of higher rates when they mature.
D)Select short-term savings instruments to lock-in earnings at current high rates.
E)Select long-term savings instruments to lock-in earnings at current low rates.

Question 24

A limit on the amount you must keep on deposit in a checking account in order to earn interest or avoid a service charge is an example of a:

A)holding period.
B)restriction.
C)overdraft fee.
D)share draft.
E)certified deposit fee.

Question 25

A $200 savings account that earns $8.50 interest in a year has a yield of ________ percent.

A)2.35
B)13.00
C)8.50
D)11.25
E)4.25

Question 26

An advantage credit unions may have over other financial institutions is:

A)interest-bearing checking accounts.
B)lower loan rates.
C)flexible-rate loans.
D)credit cards.
E)variable-rate savings plans.

Question 27

Comparison of earnings for different savings plans can best be accomplished using the:

A)discounted present value.
B)compounding frequencies.
C)net present value.
D)annual percentage yield.
E)after-tax rate of return.

Question 28

A certificate of deposit usually has:

A)earnings based on fluctuating market interest rates.
B)no set time period.
C)a penalty for early withdrawal of funds.
D)a variable rate of return.
E)no minimum deposit amount.

Question 29

The rate of return on a savings account is also referred to as:

A)liquidity.
B)compounding.
C)yield.
D)opportunity cost.
E)asset turnover.

Question 30

To avoid high fees for cash loans,a person should avoid borrowing from a:

A)credit union.
B)savings and loan association.
C)pawnshop.
D)commercial bank.
E)mutual savings bank.

Question 31

A saver will usually receive higher earnings with which one of the following types of savings plans?

A)Certificate of deposit
B)Debit account
C)Regular savings account
D)Share account
E)Credit account

Question 32

Savings compounded ________ would have the highest effective yield.

A)daily
B)annually
C)semiannually
D)monthly
E)weekly

Question 33

Which is a true of investing in Series EE U.S.Savings Bonds?

A)The interest earned is always exempt from federal income taxes.
B)Federal income tax on earnings may be deferred until the bonds are redeemed.
C)The interest rate on these bonds is adjusted twice a year for inflation.
D)Series EE Bonds must be purchased for set amounts over $100.
E)They can be redeemed any time without forfeiting interest.

Question 34

A regular savings account at a credit union is called a ________ account.

A)share
B)NOW
C)club
D)certificate
E)money market

Question 35

The business hours and ATM locations of a financial institution refer to the ________ feature when selecting a financial institution.

A)safety
B)cost
C)compounding
D)liquidity
E)convenience

Question 36

Which one of the following savings plans is not covered by federal deposit insurance?

A)Account at a savings and loan
B)Regular checking account at a commercial bank
C)Money market account at a commercial bank
D)Money market fund with an investment company
E)Certificate of deposit at a commercial bank

Question 37

The purpose of a "special endorsement" is to:

A)cash a check.
B)deposit a check.
C)transfer a check to another person.
D)withdraw cash from your account.
E)reduce the charge for service fees.

Question 38

The Federal Deposit Insurance Corporation insures savings plans at:

A)credit unions and mutual savings banks.
B)commercial banks and savings and loan associations.
C)investment companies and finance companies.
D)insurance companies and credit unions.
E)commercial banks and credit unions.

Question 39

The profits from a mutual savings bank go to the:

A)creditors.
B)loan applicants.
C)stockholders.
D)depositors.
E)community in which it operates.

Question 40

A common service offered by investment companies is:

A)interest-bearing checking accounts.
B)variable-rate loans.
C)credit card accounts.
D)savings bonds.
E)money market funds.

Question 41

What is the rate that banks charge large corporations for loans called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 42

Tim Gleason has set up a legal agreement that allows the First State Bank of Orlando to manage funds set aside for his daughter's college education.What type of financial service is Tim using?

A)Payment service
B)Savings service
C)Credit service
D)Trust service
E)Asset management

Question 43

A ________ endorsement would be used if a person is presenting a check in person to obtain cash.

A)restrictive
B)common
C)special
D)blank
E)documented

Question 44

A ________ endorsement consists of the words "for deposit only" followed by your signature and account number and is especially useful when you are depositing checks.

A)blank
B)restrictive
C)common
D)special
E)documented

Question 45

Based on the following information,what amount would be subtracted from the bank statement side of the bank reconciliation? ATM withdrawal $20; Outstanding checks $154; Interest $1.25; Deposit in transit $75.

A)$154.00
B)$20.00
C)$174.00
D)$155.25
E)$75.00

Question 46

A personal check with guaranteed payment is called a:

A)traveler's check.
B)bank draft.
C)certified check.
D)money order.
E)cashier's check.

Question 47

What is the rate an individual will pay to borrow for the purchase of a new home called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 48

Which of the following is a user-owned,nonprofit,cooperative financial institution?

A)Life insurance company
B)Investment company
C)Mortgage company
D)Pawnshop
E)Credit union

Question 49

Which of the following institutions is organized primarily to provide loans to purchase homes?

A)Life insurance company
B)Finance company
C)Mortgage company
D)Pawnshop
E)Investment company

Question 50

Which of the following is a drawback of a money market fund from an investment company?

A)Penalty if money is withdrawn early
B)Lower rate of interest if redeemed within the first five years
C)Lacks liquidity
D)Not covered by FDIC insurance
E)Not usually allowed to write checks

Question 51

Nate Rogers deposited $2,500 in a 3-year bank certificate of deposit which pays six percent interest.What type of financial service is Nate using?

A)Payment service
B)Savings service
C)Credit service
D)Trust service
E)Budget counseling

Question 52

David Wynn gets an auto loan from his credit union for $11,500.David will make monthly payments over the next five years to repay the loan.What type of financial service is David using?

A)Payment service
B)Savings service
C)Credit service
D)Trust service
E)Asset management

Question 53

What is the rate that the Federal Reserve banks charge financial institutions for loans called?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 54

Which of the following has the main purpose of issuing a policy that provides financial security for dependents?

A)Life insurance company
B)Commercial bank
C)Savings and loan association
D)Credit union
E)Mutual savings bank

Question 55

Nick Martin writes a check to pay for day care for his son.What type of financial service is Nick using?

A)Payment service
B)Savings service
C)Credit service
D)Trust service
E)Investment service

Question 56

What is the term used to refer to the yield on a long-term (20-year)debt obligation issued by the U.S.government?

A)Prime rate
B)Discount rate
C)Mortgage rate
D)Treasury bond rate
E)Corporate bond rate

Question 57

Which CD attempts to attract savers with gifts or special rates?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 58

In the bank reconciliation process,ATM withdrawals should be:

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the checkbook balance.
D)subtracted from the checkbook balance.
E)ignored.

Question 59

When preparing a bank reconciliation,outstanding checks should be:

A)added to the bank statement balance.
B)subtracted from the bank statement balance.
C)added to the checkbook balance.
D)subtracted from the checkbook balance.
E)ignored until they have cleared.

Question 60

Which of the following institutions makes loans based on the value of tangible possessions,such as jewelry and other valuables?

A)Life insurance company
B)Finance company
C)Mortgage company
D)Pawnshop
E)Investment company

Question 61

Which is a CD that offers a higher rate at set intervals,such as every six months you are invested?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 62

What type of account would be considered the most liquid?

A)3-year certificate of deposit
B)Regular savings account
C)Money market account
D)U)S.savings bond
E)Share of stock

Question 63

Determine the rate of return on a savings account in which you deposited $200.00 and earned $5.00 in interest after one year.

A)5.00%
B)0.05%
C)2.50%
D)0.20%
E)18.00%

Question 64

Your bank statement shows a balance of $695.Your checkbook register shows a balance of $562.You earned interest of $3 and had a service charge of $5.There are no outstanding deposits.What is the amount of outstanding checks?

A)$135
B)$160
C)$133
D)$6
E)$0

Question 65

Which CD starts with a higher rate,has a long time to maturity,and can be closed by the bank after a set time period?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional

Question 66

A savings account earns 3 percent.If the saver is in a 22 percent tax bracket,the after-tax savings rate of return would be ________ percent.

A)22.00
B)19.00
C)3.00
D)2.34
E)0.66

Question 67

What is the term used to refer to the cost of borrowing for large U.S.corporations?

A)Prime rate
B)Discount rate
C)Corporate bond rate
D)Treasury bond rate
E)T-bill rate

Question 68

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $520,000 in a joint account with her husband,Ted.How much is not covered by FDIC insurance?

A)$20,000
B)$260,000
C)$520,000
D)$250,000
E)$0

Question 69

Which of the following represent the use of credit?

A)Demand deposits
B)Home mortgage
C)ATM withdrawals
D)Time deposits
E)Debit card

Question 70

Which type of organization does not provide home mortgages?

A)Federal credit unions
B)Savings and loan associations
C)Employee credit unions
D)Mutual savings banks
E)Check-cashing outlets

Question 71

Series EE U.S.Savings Bonds can be purchased:

A)in increments of $25 only.
B)for any amount above $25.
C)for less than face value.
D)in increments of $50 only.
E)in whole dollar amounts only.

Question 72

What type of account would you expect to provide the poorest yield?

A)Certificate of deposit earning 4% compounded semiannually
B)Savings account earning 4% compounded annually
C)Money market account earning 4% compounded monthly
D)Money market fund earning 4% compounded monthly
E)Savings account earning 4% compounded semiannually

Question 73

Which law requires financial institutions to disclose fees,the interest rate,the annual percentage yield,and the other terms and conditions on savings account plans?

A)Truth in Savings Law
B)Truth in Lending Law
C)Expedited Funds Availability Act
D)Equal Employment Opportunity Act
E)Identity Theft Protection Act

Question 74

Which of the following types of financial institutions are insured by federal government agencies?

A)Credit card companies and finance companies
B)Credit unions and investment firms
C)Mortgage companies,banks,and credit unions
D)Banks,credit unions,and savings and loans associations
E)Banks,credit card companies,and credit unions

Question 75

Sue deposited $1,000 in an account paying 2 percent interest.The inflation rate is 5 percent.What is the buying power of the account after one year?

A)$1,050
B)$1,020
C)$1,000
D)$970
E)$950

Question 76

Which of the following is a way to reduce ATM fees?

A)Withdraw larger amounts rather than making several smaller withdrawals.
B)Withdraw the minimum amount each time you withdraw.
C)Withdraw from ATMs closest to you regardless of which bank owns the ATM.
D)Withdraw from ATMs that can be used by customers from many different banks.
E)Make a separate withdrawal for each purchase to maintain a record of your spending.

Question 77

Interest rates charged by a pawnshop:

A)can range from 3% per month to over 100% a year.
B)are usually below 5% per year.
C)are normally lower than a bank.
D)can range from 100% per month to over 300% a year.
E)are insignificant.

Question 78

Automatically buying a new CD upon maturity of the current CD is commonly referred to as:

A)creating a CD portfolio.
B)rolling over.
C)refinancing.
D)calling a CD.
E)bumping up.

Question 79

A person borrows $100 from a payday loan company,and pays $10 interest for two weeks.This would result in an annual interest rate of approximately ________ percent.Ignore compounding.

A)110
B)260
C)10
D)20
E)5

Question 80

Which CD pays earnings based on the stock market?

A)Bump-up
B)Indexed
C)Callable
D)Global
E)Promotional