FIN 269 Personal Finance chapter 4 quiz

Place the steps to writing a check in rank order from first to last.

(1) Record the date. (2) Write the name of the person receiving the funds. (3) Record the amount of the check in figures or numbers. (4) Write the amount of the check in words. (5) Sign the check. (6) Note the reason for the payment.

Check-cashing outlets usually charge fees of:

1% - 20% of the face value of the check

If you lose your debit card and report it after more than _____ days, your liability may be the total amount in your bank account.

60

True or false: Bouncing a check can be very inexpensive.

False

A reduction in long-term financial security can be caused by:

Increased borrowing; using savings

What type of financial institution typically does not have federal deposit insurance

Investment companies

Which of the following institutions offer financial services?

Life insurance companies; Mortgage companies; Investment companies; Credit card companies; Finance companies

Which type of service is not generally offered by a credit union?

Real estate brokerage

Which of the following is true about mobile transfers?

They are expanding. They can be made through wireless devices such as smartphones.

True or false: Banking online and electronic banking have expanded in recent years.

True

True or false: EE bonds continue to earn interest past their maturity date.

True

True or false: One criterion for choosing a saving plan is the interest rate.

True

A savings plan that requires a certain amount of money to be left for a specified amount of time is a:

certificate of deposit

A _____ check is a personal check with guaranteed payment

certified

A _____ ticket or slip is used to add funds to a checking account.

deposit

Activity accounts charge a fee for each check written and sometimes a fee for:

each deposit transaction

A restrictive endorsement is comprised of:

"for deposit only" and your signature

A special endorsement is comprised of:

"pay to the order of," the name of the payee and your signature.

Which of the following is the maximum amount of liability if a card issuer uses the same rules for lost or stolen debit cards as for debit cards?

$50

Common mistakes made when managing current cash needs include:

-leaving funds in low-interest accounts too long. -lacking sufficient liquid assets to pay current bills. -overspending. -using savings for current expenses.

Trusts are typically created by which of the following?

A lawyer and a commercial bank

Which of the following is not true regarding ATM's?

All financial institutions charge the same ATM fees

_____ is a process that calculates interest based on previously earned interest.

Compounding

Which of the following deposit-type institutions serve as financial intermediaries?

Credit Unions Commercial banks Savings and loans

Which deposit-type institution is user-owned, nonprofit, cooperative organization?

Credit union

Which of the following deposit-type institutions serve as financial intermediaries?

Credit unions Savings and loans Commercial banks

This type of card is a plastic access card used in computerized banking transactions.

Debit card

_____ deposits include checking accounts and other payment methods.

Demand

What is not typically a basic concern of a financial services customer?

Does the bank offer tax preparation services?

True or false: Interest-earning checking accounts normally pay high rates

False

True or false: Web-only banks have declined in recent years.

False

Select the types of federal savings bonds that are currently sold.

I; EE

In April 2006, FDIC coverage was increased for:

Keogh plans, SEP IRAs, Roth IRAs, and traditional IRAs

An institution that is owned by depositors and specializes in savings accounts and mortgage loans is a:

Mutual savings bank

_____ protection is less costly than paying a fee for an unfunded check.

Overdraft.

Which of the following is NOT a typical type of CD?

Reduction-rate

_____ checking accounts usually have a monthly service charge that you can avoid by keeping a minimum balance in the account.

Regular

Which of the following services do savings and loans offer?

Savings accounts; Lending; Checking accounts

A major concern with prepaid debit cards is

The high fees often charged

What is the purpose of liquidity?

To allow you to withdraw money on short notice

What is the main function of a finance company?

To make loans to consumers and small businesses

What is the main purpose of life insurance?

To provide financial security for dependents.

What is the main function of a mortgage company?

To provide loans to purchase homes

Which of the following is a service not offered by savings and loans?

Trip planning services

True or False: A current shortage of cash can be overcome by liquidating savings or borrowing.

True

True or False: Financial services can change due to such factors as changing interest rates and rising consumer prices.

True

True or false: A current shortage of cash will require two basic choices: liquidate savings or borrowing.

True

True or false: An effective management plan is needed for buying groceries, paying the rent, a nd other routine spending.

True

Another name for an automated teller machine (ATM) is:

a cash machine

The rent to own process is:

a lease and buy option

A regular savings account usually offers:

a low or no minimum balance requirement

Accounts that charge a flat fee for a package of services (i.e., safe deposit boxes, travelers checks, and travel insurance) are only valuable to:

a small group of customers.

The _____ is the percentage rate expressing the total amount of interest that would be received based upon time and compounding.

annual percentage yield

On an interest-bearing checking account, always compare the interest earned with:

any service fees

Share draft accounts at a credit union:

are interest bearing till a minimum balance is maintained

Payday loans are typically used by people who:

are trapped by debts

EE bonds are exempt from state and local taxes, but federal income tax is typically due:

at redemption

When interest rates are rising you should:

choose short-term savings vehicles, use long-term loans

A _____ bank is a financial institution that offers a full range of services.

commercial

Credit alternatives to be used for borrowing if an individual needs more cash than is available include:

credit cards and personal loans

Common payment choices include:

credit cards, checks, debit cards, and cash

Using savings for paying _____ expenses is one of the mistakes people make when managing current cash needs.

current

Using savings for paying ________ expenses is one of the mistakes people make when managing current cash needs.

current, immediate, daily, routine, normal, regular, everyday, personal, or present

Mutual savings banks are owned by:

depositors

Benefits of online banking include:

e-mail notices for due dates; convenience for transactions; time savings.

The biggest advantage of using APY is:

easy to compare rates

Parents who set aside funds for their children will often intend for the money to be used for:

education

When you sign the back of the check, this is an:

endorsement

Money market accounts at commercial banks are insured by _____, whereas money market funds are not.

federal deposit insurance

Drawbacks of money market accounts include:

fees for low balances and higher minimum balances required.

There is no penalty on redemption of Series EE bonds if redeemed after _____ years.

five

The benefits of creating a portfolio with CDs with multiple maturities are:

flexibility and liquidity

A money order:

guarantees payment

If a customer "rolls over" her or his payday loan, it is easy to:

have fees that exceed the amount borrowed.

A challenge of rising-rate CDs include:

high interest rates at end of the term-maybe only for a couple of months

There is a trade-off between liquidity and:

higher return

The two parts of interest on an I bond are an:

inflation rate that changes semiannually and fixed rate of interest for the life of the bond.

All of the following are deposit-type institutions that serve as financial intermediaries except:

insurance companies

For callable CDs, banks may "call" these instruments if:

interest rates drop

Additional financial services that may be needed for successful financial management include

investments, trust services, insurance, financial planning, and tax assistance.

A customer should compare and select a financial service provider if:

its cost of checking and payment services is minimum; money can be borrowed when needed; the return of savings is the best

A blank endorsement is comprised of:

just a signature

When interest rates are falling, you should:

lock in current rates by choosing long-term savings options and prefer short-term loans over long-term loans.

A trust is a legal agreement that provides for:

management of assets; created by one party for benefit of another; control of assets

Drawbacks of CD (certificate of deposit) accounts include:

minimum deposit and early withdrawal penalty

The savings alternative that offers more liquidity is:

money market accounts

Depositors with federal deposit insurance have:

more security than non-insured accounts, not lost money in recent years.

EE bonds have a minimum holding period before it can be cashed of:

one year

Which of the following are considered demand deposits:

payment accounts and checking accounts

Benefits of online banking include all of the following except:

possibility of "phishing"

When the number of days is 365 in the term, the APY formula can be expressed as: APY = 100 (interest/_____)

principal

Comparing your checkbook balance to the bank balance is called:

reconciliation

Share accounts are the same as:

regular savings accounts

High cost financial services typically include:

rent to own centers; payday loans; check cashing outlets; pawn shops

The rate of _____ is the percentage increase in the value of savings as a result of interest earned.

return

Saving funds for future use is necessary for financial:

safety

A _____ and loan association traditionally specializes in savings accounts and mortgage loans.

savings

Online payments do NOT include:

smart cards

Indexed CDs have rates that vary with the:

stock market

Financial services will usually not be affected by

stock prices

A credit union is owned by:

the members

Pawnshops are regulated by:

the state

Overdraft protection is an automatic loan made to checking account customers to cover checks written in excess of:

their balance

True or false: Time deposits include money in savings accounts and certificates of deposits.

true

Your maximum liability for a lost or stolen debit card will be $50 if you notify the financial institution within _____ days.

two

A joint account means:

two or more owners

Certified checks, cashier's checks, and money orders allow you to make a payment that the recipient knows is _____

valid

The typical customer of an activity account:

writes a few checks each month; does not maintain a minimum balance

Debit cards are different from credit cards because:

you are spending your own money when you use a debit card.

A $200 savings account that earned $8 after a year would have a rate of return, or yield, of _____ percent.

4. (8/200)

Financial institutions consider checks that are older than ______ to be "stale dated."

6 months

If there is a shortage of cash, you will have two basic choices to cope with the situation: ________ From a savings or ________

Blank 1: spend, spending, withdrawing, or withdraw Blank 2: borrow, borrowing, loan, or loans

Which of the following is not an example of type of financial service that is focused on payment services? In other words, which of the following does not involve payment of money on your part?

Regular savings account

True or false: Asset management accounts are a collection of financial services offered for a single fee.

True

Smart cards offer electronic services such as:

medical history, banking activities, transaction records, transaction records, and insurance information

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 (NOTE: only up to $250,000 can be covered) $250,000 $825,000 $300,000 $550,000 $600,000

The maximum coverage in 2020 was $250,000 per insured institution. Her total coverage was $250,000 + $50,000 + $250,000 = $550,000.

What is the face value dollar limit for electronic purchase of I and EE bonds per person per year?

$20,000

The bank balance of the checking account is $500, the current balance in the checkbook is $325, bank fees are $25, and the outstanding checks are the only additional item. How much are the outstanding checks?

$200 $500 - (325 - 25) = $200

Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $100 and earns 5% interest per year?

$5.25

If you lose your debit card and report it lost after the time period of 2 days, but before 60 days, your liability may be as high as:

$500

Bob wrote a check to Linda in the amount of $160. When she deposited the check, she accidently wrote $180 on her deposit slip (or mobile device) and the bank did not catch the error. The resulting $180 debit in Bob's account went unnoticed by both Bob and Linda. This bank error resulted from:

Bob and Linda's failure to reconcile their checking accounts.

True or false: Typically each person is insured up to $100,000 deposited in to each financial institution.

False

Which of the following are good sources of information for economic trends?

Fortune Magazine; Business Week; The Wall Street Journal

What three actions should you NOT take if you are a victim of identity theft?

Leave the area until the problem is resolved; Call your friends and neighbors; Locate the person who stole your identity.

The Truth in Savings law requires the following items to be disclosed:

The annual percentage yield (APY), the interest rate, fees on deposit accounts, and other terms and conditions of the savings plan.

A major concern with prepaid debit cards is which of the following?

The high fees often charged

Traveler's checks allow you to make payments when you are

away from home for any reason.

When comparing savings accounts rates of return, you should choose one that:

beats the rate of inflation

A _____ check is a check drawn on a financial institution.

cashier's

Benefits of U.S. savings bonds include:

government guarantee, low minimum deposit, and exemption from state and local taxes

Benefits of U.S. savings bonds include

government guarantee. exemption from state and local taxes. low minimum deposit.

Asset management accounts are commonly offered by:

investment companies

A _____ card is the document that records the official signatures of the person or persons authorized to write checks on the account.

signature

The three main types of endorsements are:

special, restrictive, blank

You are in the 25% tax bracket. So, the yield on the savings account is 8%, and the after-tax savings rate of return is:

6% 1-.25 = .75 .08 * .75 = 0.06

True or false: Debit cards allow you to wait to deduct the amounts from your account.

False

True or false: The ability to transfer money is not a necessary part of daily business activites

False

Redeemed EE bonds may be exempt from federal income tax if the funds are used to pay tuition and fees at a college or qualified technical school for yourself or for a dependent.

True

A _____ fund is an account used for savings offered by investment companies.

money market