W!SE 2

Which financial product has the most predictable income?

Certificate of deposit Reason : Most certificates of deposit (CDs) are issued with an interest rate that is fixed at a specified rate for the entire term of the deposit. The main virtue of a fixed-rate CD is its predictability. The investor knows exactly how much interest will be received annually and over the life of the CD.

Which financial product may pay a dividend?

Common stock Reason : All of these types of accounts and financial products except for common stock earn interest. Some companies declare and pay dividends to their common stock shareholders.

The National Credit Union Administration (NCUA) insures accounts in:

Credit unions Reason : The National Credit Union Association (NCUA) insures each depositor's accounts up to $100,000 in one credit union. For example, if a customer has a checking account of $1,000 and a savings account of $8,000 in the same credit union, the customer will have total insurance coverage of $9,000.

The term used to describe the ease and speed with which you can convert savings or an investment to cash is:

Liquidity Reason : The ease and speed with which you can convert savings or an investment to cash is called liquidity. Checking and statement savings accounts are highly liquid because deposits and withdrawals can be made at any time. A certificate of deposit has less liquidity because it has a fixed term - a period during which money must be kept on deposit. There can be substantial penalties for cashing in a certificate of deposit before the end of its term, perhaps losing up to three to six months' interest.

The phrase used for putting money into a savings account is:

Making a deposit Reason : Putting money into an account is "making a deposit" and taking money out is "making a withdrawal." An account owner can deposit additional money into the account at any time.

The best reason for depositing money in a bank or credit union savings account instead of keeping your money "under the mattress" is that:

Money deposited in savings accounts are F.D.I.C. insured Reason : Deposits in virtually all banks or credit unions earn interest. Banks send statements showing all deposits, withdrawals, and current account balances each month. Money earns a higher rate of interest in a savings account than in a checking account that pays interest. Money is easy to withdraw from a checking or a savings account. Money kept "under the mattress" could be stolen or lost in a fire and does not earn interest.

Which Documents should be stored in a safe-deposit box?

Mortgage loan papers. Reason : The purpose of having a safe deposit box is to have a fireproof, secure place to store valuables and irreplaceable items including legal documents such as a birth certificate and precious jewelry.

Which documents should be stored in a safe-deposit box?

Mortgage loan papers. Reason : The purpose of having a safe deposit box is to have a fireproof, secure place to store valuables and irreplaceable items including legal documents such as a birth certificate and precious jewelry.

Margaret wants to store a valuable coin collection and important papers. Generally, consumers should:

Rent a safe deposit box for their valuables Reason : Bank customers can rent safe deposit boxes from the bank. They are metal boxes kept in the bank vault where customers often keep valuable papers, financial records, jewelry, and collections.

Frankie's savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him?

Savings account interest is taxable Reason : Savings account interest is taxable. If Jerry's total earnings, including savings account interest, are high enough that he must pay income tax on them, the savings account interest is added to his other income and it is all taxed at the same rate.

Which financial product can you buy for $25, is safe, and will be worth $50 at a future date?

Series EE savings bond Reason : Series EE savings bonds, which are issued and backed by the U.S. Treasury, are purchased for one-half of their face value. These bonds earn interest monthly, and a $50 Series EE bond, which is purchased for $25, is guaranteed to reach face value within 17 years, and may reach face value sooner.

Doug wants to buy a car in two months, but does not have enough money. What is the best way for Doug to get the money he needs?

Take out a cash loan Reason : In order to get the money now, he could borrow the money by getting a car loan from an automobile dealer, bank, or credit union. Some people borrow money from family members or friends to buy a car or for the down payment on a car loan.

Employees prefer direct deposits because:

The money is generally deposited in their checking account sooner than it would be if they had to deposit it in person Reason : Instead of a negotiable check, the wage earner receives a pay stub which lists the amount that was directly deposited and the amounts withheld for taxes, health insurance, etc. Through direct deposit, earnings are transferred electronically into the recipient's bank account. Direct deposit is more convenient, safer, and usually faster than receiving and manually depositing a paycheck.

When James received his paycheck, he planned to cash it at a check cashing store. You advise him to cash it at his own bank if possible. Why?

They typically charge high fees Reason : Check-cashing stores usually charge high fees to cash checks and sometimes encourage consumers to take out high interest rate payday loans.

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the

US Treasury Department. Reason : In order to track large deposits, the federal government requires that deposits of $10,000 or more be reported to the Treasury Department. Some concerns may be that a person might be trying to avoid paying taxes on game winnings or perhaps illegal gains.

Which is the best example of a way to reduce fees paid for ATM transactions?

When making supermarket purchases with a debit card, a person adds $50 in cash to the transaction instead of using an ATM machine. Reason : Most supermarkets have a policy permitting patrons to add a cash withdrawal to a purchase made with a debit card or check without charging a fee. All of the other choices (using store ATMs, banks other than the issuing bank, and using any machine at night or the weekend) will most likely result in the person incurring ATM fees.

A person is depositing $20 in cash and a check for $50. On the checking account deposit slip, the person should

list the cash deposit separately from the check as well as the total of the deposit. Reason : Deposit slips have columns for the depositor to list cash and each check that is being deposited separately. Aside from this information, the depositor lists the total of the deposits, the date and the account number (if it is not a preprinted slip taken from the individual?s check book) on the deposit slip.