Deck 5: Managing Checking and Savings Accounts

Question 1

A stock brokerage firm is a licensed financial institution that specializes in selling and buying stocks,bonds,and other investment alternatives.

Answer 1

True

Question 2

Stock brokerage firms earn commissions on clients' stock transactions.

Answer 2

True

Question 3

Credit unions typically offer the widest variety of financial services.

Answer 3

False

Question 4

Deposits in credit unions with federal charters are insured through the National Credit Union Share Insurance Fund (NCUSIF).

Question 5

The total protection an individual might have with any institution,including all its branches,is $250,000 with no more than $125,000 each on single-ownership and joint accounts.

Question 6

The primary focus of mutual savings banks is to accept deposits from consumers and provide mortgage and consumer loans.

Question 7

The goal of monetary asset management is to maximize interest earnings and minimizing fees while keeping funds safe and readily available.

Question 8

In monetary assert management,safety means the speed and ease with which an asset can be converted to cash.

Question 9

Credit unions with federal charters have their accounts insured through the FDIC.

Question 10

Money deposited in mutual funds is insured by the federal government.

Question 11

A mutual fund is an investment company that raises money by selling shares to the public and then invests that money in a diversified portfolio of investments.

Question 12

One can increase the amount of money covered by FDIC insurance by dividing his or her money among different branch offices of the same depository institution.

Question 13

Unlike other providers of financial services,depository institutions can both take deposits and make loans to consumers.

Question 14

Monetary asset management includes setting money aside in a savings account for use later when spending or investing.

Question 15

Monetary asset management focuses primarily on funds kept readily available for investments.

Question 16

Liquidity is the speed and ease with which an asset can be converted to cash.

Question 17

Commercial banks typically offer the widest variety of financial services.

Question 18

Today,even stock brokerages and insurance companies provide certain products for use in monetary asset management.

Question 19

Stock brokerage firms are federally insured institutions.

Question 20

Mutual savings banks are called "mutual" because the depositors own the institution and share in the earnings.

Question 21

A cashier's check is drawn on the account of the financial institution itself.

Question 22

A money order is a checking instrument bought for a particular amount.

Question 23

Share draft accounts at credit unions are generally more expensive than NOW accounts at commercial banks.

Question 24

Checks allow you to transfer funds from your account to other people and organizations.

Question 25

There are no fees charged for a stop-payment order.

Question 26

The interest rate you earn on your checking and savings account can vary with the amount you have in the accounts.

Question 27

Fees of no more $10 are generally charged for money orders,certified checks and cashier's checks.

Question 28

Checking accounts that pay no interest are called NOW accounts.

Question 29

NOW accounts get their name because they are considered demand deposits.

Question 30

A checking account is sometimes called a transaction account.

Question 31

A share draft account is the credit union version of a NOW account.

Question 32

College students who are independent of their parents may qualify for very low-cost lifeline banking accounts.

Question 33

A stop-payment order works only if the check has not yet cleared your financial institution.

Question 34

NOW accounts and share draft accounts with tiered interest will pay higher interest rates on larger balances.

Question 35

When you use a debit card,funds are instantaneously removed from your account.

Question 36

The only reason to have a checking account is so that one has an account for writing checks.

Question 37

If your checking account balance drops to less than perhaps $50 at any point during a month you would likely be better off with a minimum deposit account in order to avoid fees.

Question 38

When a bank offers a "free" checking account,that means there are no fees for writing bad checks or using another bank's ATM.

Question 39

NOW accounts may pay slightly higher interest rates on larger balances.

Question 40

Acceptance for a lifeline banking account is dependent on one's income and net worth.

Question 41

Funds on deposit in a savings account are considered demand deposits.

Question 42

It is highly recommended that CD investments be made at local institutions,even though some yield may be sacrificed.

Question 43

Interest rates on longer-term CDs are usually higher than the comparable rates on shorter-term instruments.

Question 44

Funds on deposit in a savings account are considered time deposits rather than demand deposits.

Question 45

In general,the shorter the maturity time on a certificate of deposit,the higher the rate of interest that will be paid.

Question 46

Money withdrawn from a CD before the end of the specified time period is subject to interest penalties.

Question 47

The interest rate in force when a CD is purchased typically remains fixed for the entire term of the deposit.

Question 48

A long-term,fixed-rate certificate of deposit would be most appropriate when interest rates are moving up.

Question 49

CD laddering is a technique that smoothes out the fluctuations in interest rates and lowers inflation rate risk.

Question 50

Institutions have a rule requiring that savings account holders give 30 to 60 days' notice for withdrawals.

Question 51

Time deposits specify a period that the savings must be left on deposit,such as six months or three years.

Question 52

Institutions usually have a rule requiring that time deposit account holders give 30 to 60 days notice for withdrawals,although this restriction is seldom enforced.

Question 53

It is possible to lose money on a certificate of deposit if the early withdrawal penalty is greater than the interest earned.

Question 54

Bump-up CDs allow savers to bump up the interest rate once to a higher market rate.

Question 55

The safest type of endorsement on a check is a blank endorsement.

Question 56

While the majority of certificates of deposit pay a fixed rate of interest,variable-rate certificates of deposit are available.

Question 57

If one believes interests rates will move lower in the months ahead,he or she should invest in long-term,fixed-rate savings investments.

Question 58

Time deposits are savings that are expected to remain on deposit in a financial institution for an extended period.

Question 59

Fixed-time deposits specify a period of time that the savings must be left on deposit.

Question 60

Demand deposits are savings that are expected to remain on deposit in a financial institution for an extended period.

Question 61

An automatic funds transfer agreement is usually the most expensive way to avoid bad check fees.

Question 62

A tenancy by the entirety account may be opened only by spouses.

Question 63

Writing a "bad check" can be very expensive because of fees assessed by both the bank and the payee.

Question 64

Periodically,you should conduct an account reconciliation in which you compare your records with your bank's records.

Question 65

A joint account that gives each owner access to the account (without the other's signature) is called a joint tenancy account with right of survivorship.

Question 66

In community property states,the rights of the husbands and wives are unequally protected.

Question 67

A payable-on-death designation can be used to set up an individual account that automatically goes to another person when you die.

Question 68

The more frequent the compounding,the greater the effective return for the saver.

Question 69

A grace period is the time period in days during which deposits or withdrawals can be made and still earn the same interest as other savings from a given day of the interest period.

Question 70

One should accumulate enough savings to cover living expenses for six to nine months.

Question 71

Brokered certificates of deposit are available through stockbrokers.

Question 72

"Opt-in" overdraft/bounce protection can be very helpful if the institution will honor your debit card even if you have insufficient funds.

Question 73

A person whose income is dependent on commissions generally needs more readily available emergency funds than a salaried employee.

Question 74

The term money market account describes a variety of high-interest earning accounts that normally have unlimited check-writing privileges.

Question 75

A check with a blank endorsement contains only the payee's signature on the back.

Question 76

If you have an automatic overdraft loan agreement with your bank,money will be borrowed from your MasterCard or Visa as a cash advance when you write a bad check.

Question 77

Completing a signature card is part of the process when opening a checking account.

Question 78

Checks mailed to the bank for deposit should always be endorsed with a restrictive endorsement.

Question 79

The Truth in Savings Act requires depository institutions to disclose a standardized rate of interest so that depositors can easily compare various savings options.

Question 80

If the balance on either a super NOW account or a money market deposit account falls below a specified level,the account generally earns interest at the lower rate paid on a regular NOW account.