Personal Finance Chapter 4

restricted

"For deposit only" would indicate a __________ endorsement.

C. NOW account

A _____________ is an interest bearing checking account. a. certificate of deposit b. Treasury bill c. NOW account d. series EE US savings bond e. regular checking account

C. requesting a stop payment

A check you issued last week has been stolen. You can prevent it from being withdrawn from your account by an unauthorized person by a. writing a new check b. depositing the correct amount of money c. requesting a stop payment d. tearing up the check e. properly endorsing the check

A. outstanding

A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be a. outstanding b. in transit e. endorsed d. certified e. subtratcted

False

A regular savings account is a demand deposit.

B. safe deposit box

A rented drawer in a bank's vault that can be rented for an average of $30 per year and can be used for storage of important documents and other items is called a a. savings account drawer b. safe deposit box c. safe drawer d. none of the above

E. regular checking account

A(n) __________ is not an interest-bearing account. a. money market mutual fund b. money market deposit account c. NOW account d. asset management account e. regular checking account

True

As of 2012, the FDIC insures depositor's funds up to $250,000 at member banks.

False

FDIC covers stocks, bonds, and mutual funds purchased at banks.

D: conveience, services, and cost

Factors typically influencing the choice of where to maintain a checking account are: a. convenience and cost b. convenience and services c. cost and services d. convenience, services, and cost

A. certificate of deposit

Funds in a ______ must remain on deposit for a stated time period in order to avoid an interest penalty. a. certificate of deposit b. U.S. Treasury Bill c. checking account d. mutual fund e. passbook savings

D. $2,938

Harry just received $2,000 for graduation. He plans on investing this money for five yeras at 8% compounded annually. If he accomplishes this, Harry will have an ending balance of (Use time value table Appendix A) a. $2,160 b. $2,520 c. $2,608 d. $2,938 e. $3,162

less

Having some type of overdraft protection with your bank will end up costing _________ than having a check bounce.

True

If Suzie has $2,000 in checking, $50,000 in a money market account, and $75,000 in certificates of deposit (all individual accounts) at her local bank, her accounts would be completely insured through FDIC.

True

If one wanted to make monthly deposits to accumulate funds for future expenditures, a money market account would be an appropriate savings vehicle.

C. an overdraft

If you write a check for an amount greater than your account balance, the result will be a. an endorsement b. a reconciliation c. an overdraft d. a share draft e. a stop payment

ATM transactions

It costs financial institutions more for their customers to perform ________________.

C. 3-year certificate of deposit

Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal finance planning. She would like to receive a fixed rate of return over that 3-year time period. Which of the following would you recommend. a. money market deposit account b. 1-year certificate of deposit c. 3-year certificate of deposit d. series EE US savings bond e. b or c

B. $250,000

Janie Long has checking and savings account in a federally insured financial institution. The maximum amount of her coverage is a. $50,000 per account b. $250,000 c. $100,000 per account d. $200,000 e. $200,000 per account

borrowers

Low interest rates that have persisted since the financial crisis of 2008-09 have been a net benefit to ____________________.

C. pre-authorized deposits

Making arrangements to have your monthly Social Security benefits deposited directly into your account is called a. preauthorized payment b. authorized payment of funds c. preauthorized deposit d. none of the above

True

Money market deposit accounts are insured by the FDIC if purchased at an insured bank.

True

NOW accounts are appropriate for people who need to keep substantial amounts of money in a checking account.

True

One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.

B. time deposits

Savings accounts are good examples of a. demand deposits b. time deposits c. non-interest bearing accounts d. none of the above

False

Savings accounts are sometimes referred to as demand deposits.

D. credit unions

Share draft accounts are commonly offered by a. commercial banks b. savings and loan associations c. mutual savings banks d. credit unions e. insurance companies

D. effective rate

The Annual Percentage Yield is the same as the a. compound rate b. real rate c. simple rate d. effective rate e. nominal rate

C. online

The least expensive method for banks to interact with their customers a. in person b. on the phone c. online d. ATM machine e. self service kiosks

C. the higher the APY (annual percentage yield)

The more frequently a bank compounds interest, ___________ will be. a. the higher the stated interest rate b. the lower the stated interest rate c. the higher the APY (annual percentage yield) d. the lower the APY (annual percentage yield) e. a and c

signature of either party

The most common type of joint checking account would require the ____________ on all checks.

B. account reconciliation

The process used to balance the checkbook and uncover errors in recording checks, withdrawals, or deposits is called a. stopping payment on a check b. account reconciliation c. overdraft protection d. none of these

C. greater than 7.12%

The stated interest rate on your account is 7.12%, interest paid semi-annually. Your effective rate of interest (APY) will be a. lower than 7.12% b. equal to 7.12% c. greater than 7.12% d. depends if the compounding takes place within the same year e. none of these

B. checkbook ledger

Whenever you write a check or make a deposit, an entry should be made on your a. deposit slip b. checkbook ledger c. check d. ATM account e. personal check

D. traveler's checks

You are going on an overseas trip and you want to have checks that are easily converted into local currency. You should purchase a. cashier's checks b. certified checks c. conditional checks d. traveler's checks e. guaranteed checks

quarterly

You are planning to deposit $5,000 in a bank. At the end of one year, you will have more money in this account if interest is compounded ________________.

C. $50

You have $450 in your checking account when your ATM card and PIN are stolen. You could lose up to _________ if you report the lost ATM card within 2 business day. a. $0 b. $25 c. $50 d. $450 e. $500

CD

You make a promise to keep funds on deposit for a stated period of time when you open a ____________.

will

Your bank probably ____________ charge a transaction fee if you use another financial institution's ATM to make a withdrawal.

anyone

________________ can purchase cashier's checks.

D. an EFT service

Christina works at a company that offers direct deposit of her paycheck. This service is called a. an ATM service b. a FDIC service c. a money market service d. an EFT service e. an overdraft service

C. Federal Deposit Insurance Corporation

Commercial banks are insured by the a. Financial Deposit Insurance Association b. Federal Depositors Assurance Corporation c. Federal Deposit Insurance Corporation d. Financial Deposit Insurance Company e. Federal Demand Deposit Corporation

D. all of the above are true

Compared to other depository financial institutions, credit unions a. are run to benefit their members b. pay higher interest on savings c. charge lower rates on loans d. all of the above are true e. none of the above are true

True

Compound interest means that a savings account earns interest on the interest previously earned.

True

Convenience and improved record keeping are two advantages sited for online bill payment.

True

Credit Unions typically pay higer rates of return on savings than banks and savings & loan associations.

will

Dottie and Jasper have a joint checking account with rights of survivorship. If Jasper dies, his portion of the account ____________ automatically go to Dottie.

True

EFTS allow you to make payments that occur on a regular basis.