Deck 4: Managing Your Cash and Savings

Question 1

Nondepository institutions are referred to as banks.

Answer 1

False

Question 2

The Federal Deposit Insurance Corporation (FDIC)covers stocks,bonds,and mutual funds purchased at banks.

Answer 2

False

Question 3

A certified check is a personal check that a bank certifies to guarantee that funds are available.

Answer 3

True

Question 4

Keeping valuables in a safe-deposit box may reduce your homeowner's insurance premiums by eliminating the "riders" that are often needed to cover such items.

Question 5

Daily balance requirements are an important criteria while comparing different checking accounts offered by a bank.

Question 6

Visa and MasterCard issue debit cards linked to your checking account.

Question 7

Negotiable order of withdrawal (NOW)accounts manage and administer the investments in a trust account or from an estate.

Question 8

Cash is the only kind of liquid asset.

Question 9

One can hold a credit card issued by a stock brokerage firm.

Question 10

Your savings will grow faster with monthly interest compounding than with quarterly interest compounding for a given nominal interest rate.

Question 11

Cash management helps in personal financial planning.

Question 12

Interest earned for a period should be added to the ending balance shown in your checkbook while reconciling your account.

Question 13

Debit cards are a form of electronic funds transfer system (EFTS).

Question 14

Compound interest means that a savings account earns interest on the interest previously earned.

Question 15

Low interest rates create economic distortions,especially when real,inflation-adjusted interest rates are positive.

Question 16

Extremely low interest rates favor investors and boost the incentive to save.

Question 17

Which of the following is true of low interest rates?

A)They encourage investors to search for investments like Treasury bills.
B)They encourage the substitution of equity by debt.
C)They encourage investors to search for stocks paying high dividends.
D)They encourage individuals to save more.
E)They encourage paying down the national debt.

Question 18

Low interest rates that have persisted since the financial crisis of 2008-2009 have been beneficial to:

A)students.
B)retirees.
C)banks.
D)savers.
E)share investors.

Question 19

Low interest rates result in:

A)facilitating a greater supply of money for borrowers.
B)reducing the cost of financing the federal budget deficit.
C)encouraging a higher savings rate.
D)bringing more investment avenues.
E)improving the standard of living.

Question 20

You can hold an account with a mutual fund that allows you to write a limited number of checks.

Question 21

A(n)_____ is a noninterest-paying demand deposit account.

A)money market mutual fund
B)money market deposit account
C)negotiable order of withdrawal (NOW)account
D)asset management account
E)regular checking account

Question 22

Which of the following are protected by the Federal Deposit Insurance Corporation (FDIC)?

A)Money market deposit accounts
B)Money market mutual funds
C)Asset management accounts
D)Stocks and bonds
E)Life insurance policies

Question 23

Share draft accounts are offered by:

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

Question 24

Which of the following is an interest-bearing checking account?

A)Certificate of deposit
B)Treasury bill
C)Negotiable order of withdrawal (NOW)account
D)Series EE U.S.savings bond
E)Regular checking account

Question 25

You have $450 in your checking account when your ATM card and PIN are stolen.You could lose up to _____ if you notify your bank about the lost ATM card within 2-8 business days.

A)$0
B)$25
C)$50
D)$450
E)$500

Question 26

A bank customer withdraws funds by writing checks from his or her negotiable order of withdrawal (NOW)account and:

A)certificate of deposit.
B)regular checking account.
C)term insurance deposit.
D)time deposit.
E)savings account.

Question 27

Money market mutual funds:

A)allow check writing above a stipulated minimum amount.
B)are federally insured.
C)have floating maturity dates.
D)are offered by savings and loan associations (S&Ls)and credit unions.
E)pay interest 1 to 3 percent lower than those paid by regular savings account.

Question 28

Laura has a $100,000 balance in her checking account at Best Bank,and she has purchased a certificate of deposit (CD)worth $50,000 issued by Best Bank.Laura is also thinking of investing $200,000 either in Best Bank or in Trust Bank.Which of the following is a suitable strategy for Laura if she wants her deposits to be completely insured?

A)Laura should invest $200,000 in a money market deposit account (MMDA)of Best Bank.
B)Laura should invest $100,000 in a money market deposit account (MMDA)of Best Bank and invest $100,000 in an asset management account of Best Bank.
C)Laura should invest $100,000 in a money market deposit account (MMDA)of Best Bank and invest $100,000 in an asset management account of Trust Bank.
D)Laura should invest $150,000 in a money market deposit account (MMDA)of Best Bank and invest $100,000 in an asset management account of Trust Bank.
E)Laura should invest $150,000 in a money market deposit account (MMDA)of Best Bank and invest $200,000 in a money market deposit account (MMDA)of Trust Bank.

Question 29

Funds in commercial banks are protected by the:

A)National Credit Union Administration (NCUA).
B)Federal Depositors Assurance Corporation (FDAC).
C)Federal Deposit Insurance Corporation (FDIC).
D)National Credit Union Share Insurance Fund (NCUSIF).
E)Savings Association Insurance Fund (SAIF).

Question 30

Cash and near-cash resources are known as _____.

A)liquid assets
B)long-lived assets
C)noncurrent assets
D)fixed assets
E)noncash assets

Question 31

Joe Gustafson is a very busy person who prefers to use one account to handle all his financial services needs like checking,investing,and borrowing.Which of the following types of accounts is most suitable for Joe?

A)A checking account
B)A money market deposit account
C)A brokerage account
D)An asset management account
E)A savings account

Question 32

Money market deposit accounts:

A)allow free unlimited check writing every month.
B)are federally insured.
C)have floating maturity dates.
D)are offered only by credit unions.
E)pay the lowest interest rates of any bank accounts with check-writing facility.

Question 33

Credit unions are:

A)member-owned financial cooperatives.
B)mortgage lenders.
C)available to the general public.
D)special commercial lenders.
E)large institutions when compared with commercial banks.

Question 34

Which of the following is true of asset management accounts?

A)Limited free checking of available balance
B)Sweeping of excess balances into money market deposit account (MMMF)
C)Fixed annual fees and account charges on deposit account
D)Borrowing and investing facility unavailable to accountholders
E)Deposits are protected by the Securities Investor Protection Corporation (SIPC)

Question 35

You have $900 in your checking account when your ATM card and PIN are stolen.You could lose up to _____ if you notify your bank about the lost ATM card after 60 business days after your periodic statement is mailed.

A)$0
B)$50
C)$450
D)$500
E)$900

Question 36

Mike has $450 in his checking account when his ATM card and PIN are stolen.If Mike notifies his bank within two business days after he discovers the card missing,his loss is limited to _____.

A)$0
B)$25
C)$50
D)$400
E)$500

Question 37

When a savings bank is a mutual association,it is owned by the:

A)borrowers.
B)creditors.
C)depositors.
D)management.
E)local government.

Question 38

Christina's bank allows her employer to directly deposit her paycheck into her personal bank account.This service provided by Christina's bank is called a(n):

A)ATM service.
B)Federal Deposit Insurance Corporation (FDIC)service.
C)money market service.
D)electronic funds transfer system (EFTS)service
E)overdraft service.

Question 39

An investor receives the highest interest rate on his or her:

A)asset management account.
B)regular checking account.
C)negotiable order of withdrawal (NOW)account.
D)money market deposit account (MMDA).
E)share draft account

Question 40

Compared to other depository financial institutions,credit unions:

A)are more beneficial to all kinds of consumers.
B)pay lower interest on savings to their members.
C)have a greater number of account holders.
D)have a greater number of branches.
E)charge lower rates on loans to their members.

Question 41

At maturity,a deposit of $6,000 in a certificate of deposit (CD)for 10 years at 3% will be worth: (Select the closest answer.)

A)$7,340.
B)$7,800.
C)$8,064.
D)$8,678.
E)$9,005.

Question 42

Whenever you write a check or make a deposit,an entry should be made in your:

A)deposit slip.
B)checkbook ledger.
C)overdraft booklet.
D)balance sheet.
E)personal check.

Question 43

You are going on an overseas trip,and you want to carry checks.You should purchase:

A)cashier's checks.
B)certified checks.
C)conditional checks.
D)traveler's checks.
E)guaranteed checks.

Question 44

A check you issued last week has been stolen.You can prevent the amount on the check from being withdrawn from your account by an unauthorized person by:

A)writing a new check.
B)depositing the correct amount of money.
C)requesting a stop payment.
D)tearing up the check.
E)properly endorsing the check.

Question 45

Factors that typically influence the choice of where to maintain a checking account are:

A)convenience,inflation,tax rates,and cost.
B)convenience,inflation,and services.
C)cost,inflation,tax rates,and services.
D)convenience,services,and cost.
E)convenience,services,GDP,and cost.

Question 46

The _____ department of a bank provides investment and estate planning advice.

A)safe-deposit boxes
B)electronic fund transfer
C)debit card
D)NOW account
E)trust services

Question 47

A check you wrote to buy shoes last week has not yet been approved by the bank.It is said to be:

A)outstanding.
B)credited.
C)endorsed.
D)certified.
E)subtracted.

Question 48

Alice lost her ATM card and reported it missing the next day.She found that $800 had been withdrawn from her savings account.Alice's loss is equal to:

A)$0.
B)$25.
C)$50.
D)$500.
E)$800.

Question 49

The more frequently a bank compounds interest,_____ for a given nominal rate will be.

A)the higher the stated interest rate
B)the lower the inflation rate
C)the higher the effective rate
D)the lower the yield rate
E)the higher the normal rate

Question 50

A lump-sum deposit of $8,000 left in a bank for 12 years at 9%,compounded annually,will result in an ending balance of: (Select the closest answer.)

A)$11,600.
B)$16,640.
C)$22,504.
D)$52,938.
E)$96,000.

Question 51

Mary has calculated her adjusted balance as $500.She notices that her bank's service charges are $20 for this period.Mary's ending balance in her bank account is _____.

A)$520
B)$480
C)$600
D)$500
E)$510

Question 52

A safe-deposit box in a bank can be opened:

A)only when the banker's key is used.
B)only when the account holder's key is used.
C)only when the keys of both the banker and the account holder are used.
D)only when the key issued to the insurance company is used.
E)only when the keys of both the banker and the insurance company are used.

Question 53

Which of the following is true of safe-deposit boxes offered by banks?

A)They can be opened only by the banker.
B)They may increase a homeowner's insurance premiums.
C)They are owned by the customers of the bank.
D)They can be used to manage mutual funds.
E)They can be used as a storage place for important documents.

Question 54

Which of the following is a rented drawer in a bank's vault?

A)Safe-deposit box
B)ATM
C)Debit card
D)NOW account
E)Trust service

Question 55

The least expensive method for banks to interact with their customers is:

A)through a vendor.
B)through phone calls.
C)through the Internet.
D)through an ATM machine.
E)through a full-service teller.

Question 56

John Anderson deposited $10,000 in a certificate of deposit (CD)for 3 years at 5%.At maturity,it will be worth: (Use time value tables or a financial calculator.Select the closest answer.)

A)$10,500.
B)$10,725.
C)$11,400.
D)$11,580.
E)$12,400.

Question 57

Jane is a college student who withdraws cash at least five times a week to meet her everyday expenses.Jane should have a checking account with good:

A)asset management facilities.
B)automated teller machine facilities.
C)money market deposit facilities.
D)trust services.
E)mutual fund management facilities.

Question 58

The minimum denomination of T-bills is:

A)$100.
B)$500.
C)$1,000.
D)$2,000.
E)$2,500.

Question 59

When doing an account reconciliation,interest earned on your account should be:

A)deducted from your checkbook ledger.
B)added to your checkbook ledger.
C)ignored because the bank has already recorded it.
D)listed as outstanding.
E)compared to your interest calculations.

Question 60

Harry received a scholarship of $2,000.He plans to invest this money for five years at 8%,compounded annually.If he accomplishes this,Harry will have an ending balance of: (Use time value tables or a financial calculator.Select the closest answer.)

A)$2,160.
B)$2,520.
C)$2,608.
D)$2,938.
E)$3162.

Question 61

Which of the following savings vehicles is free of state and local income taxes?

A)Certificates of deposit
B)Money market mutual funds
C)Time deposits
D)Money market deposit accounts
E)I savings bonds

Question 62

The financial crisis of 2008-2009 followed by low interest rates have been beneficial to ____________. ​

A)borrowers
B)retirees
C)shareholders
D)investors

Question 63

Higher interest rates on certificates of deposit are associated with:

A)higher nominal rates.
B)shorter yield curves.
C)longer maturities.
D)smaller deposits.
E)lower effective rates.

Question 64

You are buying a large amount of merchandise through the mail from a dealer several hundred miles from you with whom you have never dealt before.The dealer will probably require that you pay him with ____________. ​

A)a certified check
B)a credit card
C)overdraft protection
D)cash

Question 65

Kate tends to issue checks quite often without having sufficient balance in her account.She should look for an account with a(n)____________ facility. ​

A)ATM
B)overdraft protection
C)trust services
D)mutual fund management

Question 66

____________ offer banking services but do not accept deposits like traditional banks. ​

A)Nondepository institutions
B)Depository institutions
C)Nonprofit organizations
D)Credit bureaus

Question 67

Low interest rates ____________. ​

A)increase the number of financial institutions
B)do not impact the supply of credit
C)increase the demand for lower-grade riskier bonds
D)decrease employment opportunities

Question 68

The Federal Deposit Insurance Corporation (FDIC)insures each ____________ up to a stated maximum dollar amount at any given financial institution. ​

A)depositor
B)account
C)shareholder
D)bank

Question 69

Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty.

A)savings account
B)U.S.Treasury bill
C)checking account
D)negotiable order of withdrawal (NOW)account
E)certificate of deposit

Question 70

Interest rates are the lowest on ____________. ​

A)savings accounts
B)regular checking accounts
C)money market deposit accounts
D)certificates of deposit

Question 71

People who do not have checking accounts often use ____________. ​

A)a cashier's check
B)overdraft protection
C)a debit card
D)a checkbook ledger

Question 72

____________ is the routine,day-to-day administration of liquid assets by an individual or family. ​

A)Depository management
B)Resource management
C)Cash management
D)Financial management

Question 73

The percentage of ____________ out of disposable income has decreased due to low interest rates and has impacted the investment choices of individuals. ​

A)savings
B)expenditure
C)taxable income
D)insurance

Question 74

Which of the following would be an appropriate savings vehicle if you plan to use your savings within a year and expect interest rates to fall over the next few months?

A)A money market deposit account
B)A money market mutual fund
C)A certificate of deposit
D)A Series EE U.S.savings bond
E)A Treasury bill

Question 75

Individuals prefer to invest their savings in stocks rather than traditional instruments like Treasury bonds because of ____________. ​

A)low interest rates
B)high tax rates
C)low GDP rates
D)high effective rates

Question 76

It costs financial institutions more if their customers perform ____________. ​

A)ATM transactions
B)Internet transactions
C)teller transactions
D)check transactions

Question 77

Liquid assets would include your savings account and your ____________. ​

A)money market deposit account
B)10-year Treasury bond
C)3-year certificate of deposit purchased in the current financial year
D)Series EE U.S.savings bond

Question 78

A ____________ account is called a demand deposit account. ​

A)checking
B)savings
C)term deposit
D)time deposit

Question 79

The interest earned on an individual's _____ is free of state and local income taxes.

A)Series EE bonds
B)certificates of deposit
C)term deposits
D)money market deposit accounts
E)time deposits

Question 80

Banks must notify customers ____________ days before lowering rates on deposit accounts or certificates of deposit. ​

A)30
B)60
C)15
D)45