CCP fin lit ch 5//:cook

Based on the following information, what amount would be SUBTRACTED from the BANK BALANCE side of a checking account reconciliation? Service charge $12, Outstanding checks $145, Interest $3.50, Deposit in transit $80

$145

A certificate of deposit is usually considered to be very liquid

False

A lost debit card results in potential losses similar to a lost credit card.

False

A regular savings account usually offers a higher rate of return to savers than other savings plans.

False

Savers should always attempt to obtain an interest rate that is less than the inflation rate.

False

The liquidity of a savings account refers to the rate of earning a person will receive.

False

____________ specialize in helping people save money in a manner than provides high liquidity.

Investment companies

A "free" checking account with a minimum balance of $500 has an opportunity cost of lost interest.

True

An asset management account combines several financial services for a single fee

True

Savings and loan associations offer mortgages

True

The money market fund offered by investment companies is a relatively liquid financial service.

True

Using a "debit" card is basically the same as writing a check.

True

Which of the following statements regarding debit and credit card liability is correct

a debit card carries more risk of loss to the card holder

The funds deposited in a checking account can be restricted for use by

a holding period.

Which of the following savings plans is not covered by federal deposit insurance?

a money market fund

A saver will usually earn the highest rate with which of the following types of savings plans?

certificate of deposit

Savings compounded ____________ would have the highest effective yield.

daily

Checking accounts are frequently referred to as ____________ deposits.

demand

checking accounts are frequently referred to as _________ deposits

demand

The profits from a mutual savings bank go to the:

depositors

The profits from a mutual savings bank go to the

depositors.

Joan Zemke expects interest rates to decline over the next few months. To maximize her long-term earnings she should use a:

five-year certificate of deposit

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n)

five-year certificate of deposit.

An advantage of U.S. savings bonds is

interest earned is deferred for federal tax purposes.

An advantage credit unions may have over other financial institutions is

low-cost personal loans

A trust has the purpose of:

managing the assets of a person

A trust has the purpose of

managing the assets of a person.

The major service offered by investment companies is

mutual funds.

The convenience of using a financial institution with 24-hour banking frequently requires a trade-off with

personal service

The storage of funds for future use is the purpose of ____________ services.

savings

Time deposits are another name for:

savings accounts

Time deposits consist of

savings accounts.

A savings account at a credit union is called a ____________ account.

share

When interest rates are rising, a person would be best served by

short-term savings instruments

When interest rates are rising, a person would be best served by:

short-term savings instruments

A service designed for people who write only a few checks each month is a(n) ____________ account.

special or activity

When preparing a bank reconciliation, outstanding checks should be

subtracted from the bank statement balance.

In the bank reconciliation process, service fees should be

subtracted from the checkbook balance.

the storage of funds for future use is a purpose of __________, which include savings accounts and certificates of deposit

time deposits

The purpose of a "special" endorsement is to

transfer a check to another person.

The purpose of a debit card is to

transfer money electronically.

a debit card deducts the amount of purchases from your checking account by:

transferring money electronically

A $200 savings account that earns $13 interest in a year has a yield of ____________ percent.

6. 5

ATM fees are about the same in different geographic areas.

False

Activity accounts are designed for people who write many checks each month

False

Consumer finance companies specialize in home mortgages.

False

Consumers will usually obtain the best overall value of their dollar by having all financial services with the same institution.

False

Direct deposit usually requires a waiting period for a availability of funds.

False

The more frequent the compounding, the less a person will earn on a savings account.

False

The use of electronic banking adds to the "float" time for financial services customers

False

Traditionally, a mutual savings bank offered the widest variety of financial services

False

When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance.

False

A restrictive endorsement will usually include the words "for deposit only."

True

Credit unions frequently offer lower loan rates than other financial institutions

True

Demand deposits is another term for checking accounts.

True

Higher returns on savings will usually result in less liquidity

True

Kevin Friedman only needs to write a couple of checks each month. Which type of checking account would best serve his needs?

an activity account

Comparison of earnings for different savings plans can best be accomplished using the

annual percentage yield.

An all-purpose account that provides several services is a(n

asset management account

an all-purpose account offered by investment brokers that provides several services is a:

asset management account

In recent years, membership in credit unions has:

become more flexible

A ____________ endorsement would be used if a person is presenting a check in order to obtain cash.

blank

A personal check with guaranteed payment is called a

certified check.

The first information to be recorded when writing a check is

check stub or check register.

Traditionally, the greatest variety of financial services have been offered by a(n)

commercial bank.

Which of the following is organized as a corporation and owned by stockholders?

commercial banks

The Federal Deposit Insurance Corporation provides deposit insurance for

commercial banks and savings and loan associations.

In recent years, membership in credit unions has

continued to increase

The business hours and location of a financial institution refer to the ____________ factor of selecting a financial institution.

convenience

Direct deposit and automatic monthly payments are features of

electronic banking

When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance.

false

A certificate of deposit usually has

limited liquidity.

An advantage credit unions may have over other financial institutions is:

lower loan rates

A common service offered by investment companies is:

money market funds

A financial institution organized for the main purpose of providing loans to purchase homes is a

mortgage company.

To avoid high fees for cash loans, a person should avoid borrowing from a:

pawnshop

To avoid high fees for loans, a person should not borrow from a

pawnshop.

The Truth-in-Savings law requires that financial institutions

report annual percentage yield on savings.

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions.

true

The rate of return on a savings account is also referred to as

yield.