Question 1

If a credit union goes bankrupt,who or what insures that the account will get its money back up to $250,000?

Accepted Answer

The National Credit Union Administration (NCUA) insures credit union accounts up to $250,000 through the National Credit Union Share Insurance Fund (NCUSIF). The Federal Deposit Insurance Corporation (FDIC) insures bank accounts, not credit union accounts. The Federal Savings and Loan Insurance Corporation (FSLIC) no longer exists.

Question 2

Which is not one of the three major consumer financial institutions?

Accepted Answer

The three major consumer financial institutions are commercial banks, credit unions, and savings institutions. Insurance companies are not considered as major consumer financial institutions.

Question 3

Reconciling a checking account is

Accepted Answer

Reconciling a checking account is an essential part of managing personal finances. It helps individuals keep track of their spending, catch errors, and prevent overdrafts. While online and ATM balance checks can be helpful, they are not always up-to-date, and errors can still occur.

Question 4

What are financial intermediaries?

Accepted Answer

Financial intermediaries accept deposits from savers in exchange for a promised return (interest) and then lend that money to borrowers at a higher interest rate to make a profit. Examples of financial intermediaries include banks, credit unions, and other financial institutions.

Question 5

Which of the following financial institutions qualify as a financial intermediary?

Accepted Answer

All of the options listed (commercial banks, credit unions, and savings institutions) qualify as financial intermediaries because they receive deposits from savers and use those funds to make loans or investments to borrowers.

Question 6

Which of the following statements is true regarding interest-bearing checking accounts?

Accepted Answer

Interest-bearing checking accounts typically come with certain requirements in order to earn interest on your balance, such as maintaining a minimum balance or using your debit card a certain number of times per month. There may also be penalties for overdrawing the account. However, the account may not have a monthly service charge or per-item fee, and there may be a limit on the number of checks or ATM transactions per month.

Question 7

Which of the following is a difference between commercial banks and credit unions?

Accepted Answer

Commercial banks have stockholders who own the bank and are entitled to receive profits in the form of dividends. In contrast, credit unions are nonprofit organizations owned by their members, who are also their customers. There are no stockholders in a credit union, and profits are returned to members in the form of lower fees, higher interest rates or other benefits.

D is not a difference between commercial banks and credit unions, as there are commercial banks that serve specific communities or industries, just like credit unions. A, B are incorrect as they are not true statements about commercial banks or credit unions.

Question 8

What are the types of checking accounts?

Accepted Answer

Basic and free checking accounts are good options for those who do not want to pay fees, while interest-bearing checking accounts are beneficial for those who want to earn interest on their balances. Having the option to choose between all three types of checking accounts gives customers flexibility in selecting an account that best fits their needs.

Question 9

Why is it good to balance your checking account?

Accepted Answer

Balancing your checking account allows you to check for evidence of identity theft by verifying that all transactions on your account are legitimate. It also helps you avoid overdrafting your account by making sure your records match the bank's records, allowing you to catch any discrepancies before it's too late.

Question 10

Which criteria would you not use in selecting an institution to bank with?

Accepted Answer

The square footage of a branch location is not a relevant factor when selecting a bank. It does not affect the quality of services or products provided by the bank, the convenience of location or the costs associated with banking.

Question 11

Where is a checking account referred to as a "share draft account"?

Accepted Answer

"Share draft account" is a term commonly used by credit unions to refer to a checking account. This is because credit unions are member-owned financial institutions and the term "share draft" emphasizes the idea that members hold a share in the credit union and can participate in decision-making.

Question 12

________ were established for people who have a common bond.

Accepted Answer

Credit unions were established for people who have a common bond, such as those who live in the same geographic area, work for the same employer, or belong to the same organization. They provide financial services to their members at favorable rates and are owned and controlled by their members. Commercial bonds refer to bonds acquired by businesses, credit bureaus are organizations that collect and analyze credit information on individuals and businesses, and stockholders refer to individuals who own shares in a company.

Question 13

What is a credit union?

Accepted Answer

A credit union is a not-for-profit financial institution that serves members who have a common affiliation, such as belonging to the same organization, union, or community. They provide similar services as banks, including checking accounts, loans, and credit cards, but they are owned and controlled by their members, who elect a volunteer board of directors to oversee operations. Credit unions also typically offer lower fees and interest rates than traditional banks.

Question 14

The FDIC for banks and NCUSIF for credit unions insure savings accounts up to what amount?

Accepted Answer

The FDIC insures savings accounts up to $250,000 per depositor per bank, and the NCUSIF insures savings accounts up to $250,000 per depositor per credit union. Therefore, the best choice is D, which represents the highest amount.

Question 15

Which financial institution would be the best fit for a college-aged student who needs a checking account?

Accepted Answer

The answer of Which financial institution would be the best...

Question 16

Which is not a benefit of overdraft protection?

Accepted Answer

Overdraft protection does not allow you to avoid balancing your checking account. It simply covers the costs if you happen to overdraft, but it is still crucial to regularly check your account balance and keep track of your spending.

Question 17

Which of the following is known as a negotiable instrument?

Accepted Answer

A negotiable instrument is a document that guarantees payment to the bearer or a named person on demand or at a set time in the future. Checks are the most common negotiable instrument used in business transactions. Cash, credit cards, and debit cards are not negotiable instruments.

Question 18

What is the advantage of a credit union which allows them to pay you a higher return on deposits ?

Accepted Answer

Credit unions are not-for-profit organizations, which means they don't have to pay shareholders or investors. This allows them to return profits to their members and offer higher returns on deposits.

Question 19

Anna recently opened a savings account and made three deposits in the amounts of $100,000,$65,000,and $200,000.If the Great Depression was to occur again and the bank closed,how much money would Anna be insured for?

Accepted Answer

The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per insured bank. Since Anna's total deposits add up to $365,000, the maximum amount she would be insured for is $250,000. Therefore, the correct answer is choice C.

Question 20

To choose the right type of financial instrument,which of the following should you consider?

Accepted Answer

When choosing the right type of financial instrument, it's important to consider all of these factors: fees associated with the instrument, the convenience of locations and hours for transactions or consultations, and the interest rates offered. Each of these aspects can significantly impact the overall value and suitability of a financial product for an individual's needs.

Quiz 3: Financial Instruments and Institutions