College Personal Finance CH.4

Which of the following provides deposit insurance for credit unions?

NCUA

Logan paid a bill with a special form. He received this form at his financial institution and had to pay the amount of the check plus a fee. He used a:

cashiers check

Nora bought a used car and was told that she needed a personal check with guaranteed payment. She obtained a:

certified check

Which of the following is organized as a corporation with investors (stockholders) contributing the needed capital to operate?

commercial bank

As inflation rates increase, the interest rates offered to savers usually decrease.

false

Due to the 21st Century Act (also called Check 21), the processing time for deposited checks has increased.

false

Liquidity and rate of return refer to the same thing.

false

Making transactions using a credit card will immediately reduce your bank balance.

false

Smishing is a scam that uses email spam or pop-up messages to deceive you into revealing your credit card number, social security number, passwords, or other private information.

false

The "safety" concern with banks and credit unions refers to the potential loss of money due to investors' bad spending habits.

false

The only question you should ask yourself when selecting a financial service provider is "Where can I get the best return on my savings?

false

Two years ago, Sean deposited money into a savings account and received a toaster as a free gift, which required him to leave his money on deposit for a year. The value of the toaster reduced the amount of interest he earned for the first year.

false

Web-only banks offer both online transactions and face-to-face transactions.

false

Louise got caught in a cash flow trap and desperately needed money quickly. Unfortunately, she didn't shop around and she went to a _____. As a result, her annual percentage rate was higher than 780%.

payday loan company

When Jack picked up a personal computer from the _____, he was really leasing it.

rent to own center

The text discusses several types of bonds. Which bond pays interest for 30 years that is exempt from state and local taxes?

series EE

The text discusses several types of bonds. Which bond is purchased at face value and has two components to the rate of interest earned—a fixed rate and an inflation rate that changes twice a year?

series I

Restrictive endorsement.

special endorsment

Anders went to Norway and went shopping. He had to sign his name once when he purchased this document and a second time at the store. Anders used a:

travelers check

A disadvantage of saving in a certificate of deposit is the penalty for early withdrawal.

true

Why are some financial service operations referred to as financial supermarkets?

They offer a combination of services from one source.

If you want to buy a relatively large quantity of U.S. savings bonds, you may purchase them through:

TreasuryDirect account

All of the following are deposit institutions except:

a finance company

A time deposit is also known as:

a savings account

ATM stands for:

automatic teller machine

Chloe signed the back of her check with just her signature. She used a(n):

blank endorsment

A joint account with Sara and John allows:

both write check on the account

A school ID that includes prepaid amounts for school lunches is called a debit card.

false

Each year, check writing is being used more often.

false

Preston never opened his bank statements, so he was surprised to see that he had incurred a service charge because his balance went below a required minimum balance. In addition, he did not earn interest for this month. What kind of account does Preston have?

interest earning checking account

When Angela wanted to provide financial security for her dependents, she considered purchasing a product that would provide income replacement in the event of her untimely death and also provide a savings/investment component while she is alive. Which company would she most likely do business with?

life insurance company

A drawback of a regular savings account is the:

low rate of return

If a check is lost or stolen, you should use a:

stop payment order

Financial service activities through your smartphone or tablet include text banking, mobile web banking, and banking apps.

true

I bonds earn interest based on a fixed rate plus an inflation rate.

true

Harvey needed some cash quickly, so he received a short-term loan based on the proportional value of an old ring. Where did he go?

pawnshop

Common payment choices for everyday activities include all of the following except:

checks and short term loans

Cathy needs a full range of financial services, including checking, savings, and lending. To which of the following should she go?

commercial bank

Which of the following offers a full range of financial services including checking, savings, lending, and other services?

commercial bank

Commercial banks and credit unions are both financial institutions; however, they are different types of organizations.

true

Which of the following is NOT required when writing a check?

drivers licence number

A savings account is also known as a demand deposit.

false

Investments, insurance, and tax assistance are tools for financial planning and are also known as:

financial services

A certificate of deposit that has earnings based on the stock market is called a(n):

indexed CD

A credit card is a type of:

loan, borrowing

Which of the following will likely provide the most expensive loans?

payday loan company

A drawback of a regular savings account is:

A relatively low rate of return.

Which of the following is correct about inflation?

In order to increase buying power, you need to earn a rate higher than the rate of inflation.

Wanda bought a certificate of deposit and automatically received a free bike. She purchased a(n):

Promotional CD.

When Flo says she's "going to the bank," she may be implying that she is visiting a credit union or stopping at an ATM.

True

Patrick is interested in opening a different account that will allow him to write a few checks each month for a fee per check, but he is unable to maintain a minimum balance. He should open a(n):

activity account

In general, which fees have doubled or tripled in price at some financial institutions for checking accounts?

all of these

When you select a financial services provider, you should ask all of the following questions except:

all should be asked

The Truth in Savings Act requires financial institutions to disclose the _____ on savings accounts.

annual percentage yield (APY)

An all-in-one account that provides a complete financial services program for a single fee is known as:

asset management account

Karen wanted a certificate of deposit that would definitely be available the entire length of time until maturity. She would NOT want to consider a(n):

callable CD

When you select a financial services provider, you may find all of the following to be major factors except:

company logo

Earning interest on previously earned interest is called:

compounding

Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work?

credit card company

Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?

debit card

A $200 savings account that earned $5 after one year would have a rate of return, or yield, of 5 percent.

false

A benefit of investing in a certificate of deposit is the penalty for early withdrawal

false

A bump-up CD allows an investor to increase the amount invested at various intervals.

false

A callable CD allows investors to "cash in" their investment early.

false

A commercial bank is the same thing as a credit union.

false

If you rent a big-screen television from a rent-to-own center for a week, you will be certain to own it at the end of the first week.

false

Will wants to open an account with $500 that will allow him easy access to his funds (by checks, ATMs, or debit card usage) from many locations. He also wants to earn at least a low interest rate and have federal deposit insurance. What kind of account should he open?

interest earning checking account

Aidan wants to be able to tap or wave his phone at the point-of-sale terminal sensor to complete purchases. Which of the following tools should he use?

mobile transfer

Justin needs to have access to his money in five months. The best option for his savings is a:

money market account

Another name for a regular savings account is a:

passbook or statement account

When Imogene brought a necklace to a _______, she received a loan based on its proportional value.

pawnshop

Earnings on savings can be measured by the:

rate of return

Shelby has an account at a financial institution that will waive the monthly fee if she keeps a certain amount in savings. What kind of account does she have?

regular checking account

Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe (insured), which of the following should he use?

savings account

Which of the following is NOT a financial publication that can provide information about financial services and economic conditions?

the daily market

A loan from a pawnshop will typically be more expensive than one from a bank.

true

An asset management account is an all-in-one account that is also called a cash management account.

true

As inflation rates increase, the interest rates offered to savers usually increase

true

Bank customers may now make withdrawals from ATMs using a smartphone, a cash code, and a PIN.

true

Each year, check writing is being used less often.

true

If you think that rates will fall in the future, you should buy a long-term CD to lock in your rate now.

true

Lydia found a check that she was given for her birthday nine months earlier. Her bank should refuse to cash the check.

true

Money market funds are not covered by federal deposit insurance

true

The FDIC insures a depositor's savings account up to $250,000 per insured financial institution.

true

When Ted needs more cash than he has available, his choices include liquidating savings and borrowing.

true

A legal agreement that provides for the management and control of assets by one party for the benefit of another is known as:

trust

Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?

trust

All of the following are non-deposit institutions except:

credit union

The FDIC insures a depositor's savings account up to $200,000 per insured financial institution.

false

Kylie went to a post office to obtain a:

money order

Which of the following is NOT correct?

Check 21 increases the fees

Zoe signed the back of her check with the words "for deposit only." She used a(n):

Restrictive endorsement.

Nicholas earned 8 percent in his savings account. If he is in the 28 percent tax bracket, what is his after-tax savings rate of return?

5.76

Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

50

Gwen had three accounts as listed here. In 2020, how much was her total insurance coverage by the FDIC? Bank A: $250,000 Bank B: $50,000 Bank C: $300,000

550,000

What is the APY for a one-year $4,000 certificate of deposit with $280 interest?

7%

Evan had three accounts as listed below. In 2020, how much was his total insurance coverage by the FDIC? Bank A: $150,000 Bank B: $50,000 Bank C: $350,000

450,000

Victor read the fine print for a checking account he was thinking about using. The fine print said, "A minimum balance of $500 is required. If your balance falls below this level, you will be assessed a monthly fee of $10." Since Victor was planning to keep only a $50 balance in his account, how much could he be charged each year?

120.00

Given the information here, what should Jason's adjusted bank balance be for his bank reconciliation? Bank balance:$ 300Outstanding checks:$ 129Deposit in transit:$ 50ATM Fees:$ 26Interest earned:$ 5Checkbook balance:$ 242

221

What is the APY for a savings account with a $250 balance that receives $9 interest for the year?

3.6%

Opal earned 6 percent in her savings account. If she is in the 25 percent tax bracket, what is her after-tax savings rate of return?

4.5%

Given the information here, what should Jason's adjusted checkbook balance be? Bank balance:$ 600Outstanding checks:$ 260Deposit in transit:$ 100ATM fees:$ 50Interest earned:$ 10Checkbook balance:$ 480

440

Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 70 days. What is the most that he is liable for?

238

The insurance coverage provided by the FDIC for a savings account is ________ per depositor per insured financial institution.

250,000

Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank's perspective.

false

The Truth in Savings Act requires financial institutions to disclose the interest rate on loans.

false

The best option for borrowing money at a low rate is to use a payday loan organization.

false

Marcus bought a certificate of deposit whose interest rate is based on the stock market. Sometimes, his earnings are higher than other similar CDs, and at other times, his earnings are lower. He purchased a(n):

indexed CD

Which of the following usually offers money market mutual funds?

investment company

Jennifer purchased a prepaid card for transit fares and highway tolls. What kind of card did she purchase?

A stored-value card.

Which of the following is correct?

Bank customers typically are provided with online access to view and print checks that have been paid

Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?

budget spending

A demand deposit is also known as:

checking account

Which of the following refers to the opportunity to withdraw your money on short notice without incurring a loss in value?

liquidity

Zach wants to open an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open?

money market account

Amber wants to open an account, but she doesn't know which kind is appropriate. She is interested in earning a higher interest rate and plans to keep at least $1,000 in her account so she can avoid paying a fee. Amber wants to open her account at an investment company and understands that her account will not be covered by federal deposit insurance. What kind of account should she open?

money market fund

Which of the following primarily provides loans for home purchases?

mortgage company

Which of the following is a type of electronic payment?

smart card