Deck 5: Financial Services: Savings Plans and Payment Accounts

Question 1

An all-purpose account that provides several services is a(n):

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

Answer 1

asset management account.

Question 2

Credit unions frequently offer lower loan rates than other financial institutions.

Answer 2

True

Question 3

The purpose of a debit card is to:

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

Answer 3

transfer money electronically.

Question 4

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

Question 5

An asset management account combines several financial services for a single fee.

Question 6

Demand deposits are another term for checking accounts.

Question 7

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

Question 8

When interest rates are rising,a person would be best served by:

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

Question 9

Higher returns on savings will usually result in less liquidity.

Question 10

The money market fund offered by investment companies is a relatively liquid financial service.

Question 11

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 12

Savings and loan associations offer mortgages.

Question 13

A regular savings account usually offers a higher rate of return to savers than other savings plans.

Question 14

All-in-one accounts may be used by financial institutions to simplify the maze of financial services and to attract customers.

Question 15

The storage of funds for future use is a purpose of ____________ services.

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

Question 16

A restrictive endorsement will usually include the words "for deposit only."

Question 17

Joan Zemke expects interest rates to decline over the next few months.To maximize her earnings she should use a(n):

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

Question 18

A "free" checking account with a minimum balance of $500 has an opportunity cost of lost interest.

Question 19

A certificate of deposit is usually considered to be very liquid.

Question 20

Using a "debit" card is basically the same as writing a check.

Question 21

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.

Question 22

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

A)interest-bearing checking accounts.
B)low-cost personal loans.
C)flexible-rate loans.
D)credit cards.
E)variable-rate savings plans.

Question 23

A $200 savings account that earns $13 interest in a year has a yield of ____________ percent.

A)6.00
B)13.00
C)7.00
D)11.25
E)6.50

Question 24

Time deposits consist of:

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

Question 25

Savings compounded ____________ would have the highest effective yield.

A)daily
B)annually
C)semi-annually
D)monthly
E)weekly

Question 26

Which is an advantage of investing in Series EE U.S.Savings Bonds?

A)When a bond is cashed,the earned interest is exempt from federal income taxes.
B)Interest is not taxed by the federal government until the bond is cashed.
C)The interest rate on the bond is adjusted to keep up with inflation.
D)Series EE Bonds can be sold at a profit on the open bond market.
E)The rates on Series EE Bonds are usually higher than the rates offered on stocks or corporate bonds.

Question 27

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

A)discounted present value.
B)compounded rate of return.
C)net present value.
D)annual percentage yielD.
E)after-tax rate of return.

Question 28

Traditionally,the greatest variety of financial services is offered by:

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

Question 29

In recent years,membership in credit unions has:

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

Question 30

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 31

A certificate of deposit usually has:

A)high interest-rate risk.
B)low safety for savers.
C)limited liquidity.
D)a variable rate of return.
E)no minimum deposit amount.

Question 32

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 33

To avoid high fees for 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 34

Checking accounts are frequently referred to as ____________ deposits.

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

Question 35

The business hours and location of a financial institution refer to the ____________ factor of selecting a financial institution.

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

Question 36

The Truth-in-Savings law requires that financial institutions:

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

Question 37

A savings account at a credit union is called a ____________ account.

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

Question 38

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

A)passbook 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 39

A saver will usually earn the highest rate with which one of the following types of savings plans?

A)certificate of deposit
B)debit account
C)passbook account
D)share account
E)NOW account

Question 40

The major service offered by investment companies is:

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

Question 41

The Expedited Funds Availability Act requires that funds be available to depositors:

A)within 5 days for local checks
B)within 2 days for local checks
C)within 2 days for both local checks and out-of-town checks
D)within 2 days for out-of-town checks
E)immediately upon deposit

Question 42

Which of the following is a deposit institution?

A)life insurance company
B)investment company
C)mortgage company
D)pawnshop
E)credit union

Question 43

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 44

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

A)prime
B)discount
C)mortgage
D)treasury bond
E)corporate bond

Question 45

What is the rate that the Federal Reserve charges banks for loans called?

A)prime
B)discount
C)mortgage
D)treasury bond
E)corporate bond

Question 46

A endorsement is especially useful when you are depositing checks.

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

Question 47

What is the term used to refer to the yield on a long term bond issued by the federal government?

A)prime rate
B)discount rate
C)mortgage rate
D)treasury bond rate
E)corporate bond rate

Question 48

Based on the following information,what amount would be subtracted from the bank balance side of the checking account reconciliation? Service charge $12;Outstanding checks $145;Interest $3.50;Deposit in transit $80

A)$145.00
B)$12.00
C)$157.00
D)$148.50
E)$80.00

Question 49

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

A)prime
B)discount
C)mortgage
D)treasury bond
E)corporate bond

Question 50

Which of the following is an effective strategy 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 51

Nate Rogers deposited $5,000 in a 3-year bank CD which pays six percent interest.What type of financial service is Nate using?

A)payment service
B)savings service
C)borrowing service
D)trust service
E)asset management

Question 52

The Federal Deposit Insurance Corporation provides deposit insurance for:

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 53

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 54

David Wynn gets a personal loan from his credit union for $1,000.David will make monthly payments $85.15 over the next year to repay the loan.What type of financial service is David using?

A)payment service
B)savings service
C)borrowing service
D)trust service
E)asset management

Question 55

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

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

Question 56

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

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

Question 57

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 58

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

A)payment service
B)savings service
C)borrowing service
D)trust services
E)asset management

Question 59

In the bank reconciliation process,service fees 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 60

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)borrowing service
D)trust service
E)asset management

Question 61

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $200,000 in an individual account and $424,000 in a joint account with her husband,Ted.How much of Suzanne's money is not covered by FDIC insurance?

A)$162,000
B)$174,000
C)$374,000
D)$50,000
E)$0

Question 62

Purchasing 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 63

Sue deposited $1,000 in an account paying 3 percent interest.The inflation rate is 5 percent.What is the buying power of the account after one year?

A)$1,050
B)$1,030
C)$1,000
D)$980
E)$950

Question 64

A person borrows $200 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)260
B)130
C)40
D)20
E)5

Question 65

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

A)Certificate of deposit.
B)Passbook savings account.
C)Money market account.
D)Money market funD.
E)CD.

Question 66

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

A)bump-up
B)indexed
C)callable
D)global
E)promotional

Question 67

Which is a CD that offers a higher rate for every six months you are invested?

A)bump-up
B)indexed
C)callable
D)global
E)promotional

Question 68

A savings account earns 4 percent.If the saver is in a 28 percent tax bracket,the after-tax savings rate of return would be ____ percent.

A)28.00
B)16.72
C)4.00
D)2.88
E)1.12

Question 69

Which law requires banks and other financial institutions to disclose fees,the annual percentage yield,and the other terms and conditions on checking and savings accounts?

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 70

Which CD pays earnings based on the stock market?

A)bump-up
B)indexed
C)callable
D)global
E)promotional

Question 71

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)minimum required holding period
D)lack of FDIC insurance
E)taxed at a higher rate than other investments

Question 72

Which of the following types of financial institutions provide Federal Deposit Insurance (FDIC)coverage?

A)credit card companies and finance companies
B)credit unions and brokerage firms
C)mortgage companies,commercial banks,and credit unions
D)commercial banks,credit unions,and savings and loans
E)commercial banks,credit card companies,and credit unions

Question 73

Which of the following is not a deposit institution?

A)life insurance company
B)commercial bank
C)savings and loan association
D)credit union
E)mutual savings bank

Question 74

Which of the following institutions makes loans based on the value of tangibles possessions,such as jewelry and collectibles?

A)life insurance company
B)finance company
C)mortgage company
D)pawnshop
E)investment company

Question 75

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)payroll check cashing services

Question 76

What type of account would be considered the most liquid?

A)certificate of deposit
B)checking account
C)money market account
D)brokerage account
E)share of stock

Question 77

A pawnshop with a monthly interest rate of 2.75 percent would have an annual interest rate of ____ percent.Ignore compounding.

A)33.00
B)27.50
C)20.00
D)5.50
E)2.75

Question 78

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

A)bump-up
B)indexed
C)callable
D)global
E)promotional

Question 79

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 80

Your bank statement shows a balance of $670.Your checkbook register shows a balance of $462.You earned interest of $2 and had a service charge of $4.There are no outstanding deposits.What is the amount of outstanding checks?

A)$210
B)$208
C)$180
D)$12
E)$6