Personal Finance Chp 4 quiz

NOW Accounts (Negotiable order of withdrawal)

A checking account which pays interest.

Federal deposit insurance:

A fail-safe for all financial assets you can buy

A certificate of deposit will get you:

A higher rate of return than most savings accounts

A money market deposit account is:

A type of savings account

A certificate of deposit is:

A type of savings account with a higher rate of return than most

Money Market Deposit Accounts

Federally insured savings account. Competes with money market mutual funds.

Which of the following insures credit union savings accounts for up to $250,000?

National Credit Union Share Insurance Fund (NCUSIF)

Money Market Mutual Fund

Pools the funds of many small investors to purchase high-return, short term securities. NOT federally insured, allows check writing, typically 1 to3 percent higher than savings accounts.

Money market means:

Short-term instead of long-term like in the debt market

A credit union's non-profit status has what effect?

Some benefit in pricing to its members for deposits and loans

Which of the following is true regarding U.S. Treasury bills?

T-bills are sold on a discount basis

Financial assets covered by federal deposit insurance include:

a certificate of deposit at Bank of Americ

Series EE savings bonds

a savings bond issued in various denominations by the US Treasury. Purchase price is a uniform 50% of face value. Earn interest at a fixed rate for 30 years. Special tax advantages under certain conditions when used to fund qualified college education expense

If you write checks for amounts greater than your balance, this would likely result in all of the following except: a. increased creditworthiness. b. the merchants to whom you wrote the bad checks refusing to accept future checks from you. c. penalty fees deducted from your checking account. d. legal proceedings initiated against you if the bank believes you are intentionally writing bad checks.

a. increased creditworthiness

Which of the following will likely pay the highest rate of interest? a. U.S. savings bond b. Certificate of deposit c. Savings account d. Checking account

b. certificate of deposit

All of the following describe savings accounts except: a. they earn higher rates of interest than checking deposits. b. the amount of the balance has no effect on the rate of interest. c. they are a type of liquid asset. d. they are referred to as time deposits.

b. the amount of the balance has no effect on the rate of interest

Low interest rates encourage a. savings. b. the reduction of debt. c. risk-taking. d. all of these.

c. risk taking

A money market mutual fund might purchase any of the following EXCEPT: a. Commercial paper b. T-Bills c. Toilet paper d. Municipal bonds

c. toilet paper

An example of a demand deposit is

checking account

Asset Management Account

comprehensive deposit account, offered primarily by brokerage houses and mutual funds (non-depository institute). Combines checking, investing, and borrowing activities.

Which of the following is a nondepository financial institution? a. Stock brokerage firm b. Finance company c. Life insurance company d. All of these

d. All of these

A type of check that guarantees payment is: a. a cashier's check. b. a traveler's check. c. a certified check. d. all of these

d. all of these

Which of the following is a factor that typically influences the choice of where to maintain a checking account? a. Convenience of use b. Services offered c. Costs of services and/or interest rates offered d. All of these

d. all of these

Which of the following is not an interest-paying checking account? a. Money market deposit account (MMDA) b. Negotiable order of withdrawal (NOW) account c. Money market mutual fund (MMMF) d. Certificate of deposit (CD

d. certificate of deposit

Features of a safe-deposit box include all of the following except: a. if a safe-deposit box is apparently unused for a number of years, your state can view it as abandoned and its contents as unclaimed property. b. it takes two keys to open. c. keeping valuables in a safe-deposit box may reduce homeowner's insurance. d. it is an excellent storage place for documents you might need in a hurry.

d. it is an excellent storage place for documents you might need in a hurry.

Which of the following is an example of an illiquid asset? a. Money market deposit account b. Money market mutual fund c. U.S. Treasury bill d. None of these

d. none of these

T/F Asset management accounts (AMAs) are offered by depository financial institutions.

false

T/F If you fail to notify your bank within 30 days of an error made on an electronic funds transfer, the bank has no obligation under federal law to conduct an investigation or return your money.

false

T/F Money market mutual funds (MMMFs) purchased at commercial banks are FDIC insured

false

T/F Securities purchased through your bank are protected through the FDIC.

false

T/F The Truth-in-Savings Act of 1993 allows banking institutions to avoid paying interest on any account in which the balance falls below a certain minimum amount for just one day.

false

Due in part to the growth of interest-paying checking accounts, bank service charges have

increased sharply

I Savings Bonds

issued at face value by the us Treasury, whose partially fixed rate provides some inflation protection.

Credit unions are different from regular banks in that:

member owned

For any given nominal rate, which of the following types of compounding would result in the greatest effective rate?

monthly

A money market mutual fund is:

mutual fund that buys securities that mature in under a year, so it is safe and fairly liquid

The promised rate of interest paid on a savings deposit or charged on a loan is the

nominal rate of interest

Certificate of Deposit (CD)

savings instrument which requires a minimum deposit and maturity range.

T/F A married couple can deposit up to $1,500,000 in several accounts at one bank and still be fully insured.

true

T/F Banks can initiate legal proceedings against account holders who intentionally overdraw their accounts.

true

T/F To purchase a $100 Series EE bond, you'll need just $50.

true

T/F You are likely to succeed in establishing a savings program if you make savings a priority in your budget and pay yourself first.

true

U.S. Treasury bill (t-bill)

ultimate safe haven for savings and investing, issued by the US treasury in the ongoing process of funding the national debt. Free from state and local income tax

Joni invests $800 at 4%, compounded quarterly. Total interest earned in one year will be?

$32.80