chap 5
Cash and investments that can be easily converted into cash are termed A. liquid assets. B. illiquid assets. C. depositable assets. D. capital assets. E. None of the above are correct.
A
Comprehensive financial services packages that offer checking accounts, debit and credit cards, loans and brokerage services are known as? A. Asset management accounts B. MMMFs C. Credit Unions D. MMDA's
A
The Truth in Savings Act of 1993 A. helps investors compare interest rates on investment options. B. ensures that all investments are federally insured. C. requires that all institutions publish only annually compounded APRs. D. All of the above are correct.
A
Which of the following financial institutions is a not−for−profit organization that is open only to members of that institution and tends to offer more favorable interest rates to borrowers and savers? A. Credit union B. Savings bank C. Savings and loan association D. Commercial bank E. None of the above are correct.
A
Your bank, First Bank, charges you $1.50 every time you use an ATM that is not owned by them. Unfortunately, there is no First Bank ATM near your school. There is a Second Bank ATM in the Student Center, which you use several times a week to withdraw $10 at a time for lunch, video games, etc. What is the best piece of advice regarding these transactions? A. Avoid them since you are effectively paying 15% interest to access your cash. B. They're OK as long as you enter the transactions in your check register. C. Make sure you have overdraft protection on your account. D. They will make it hard to balance your account since these transactions won't show up on your monthly statements.
A
Your friend Binna has a money market mutual fund account, automatic deposit of her paycheck into an interest-bearing checking account at the company credit union, and a CD from the local branch of a bank that advertises "coast-to-coast" banking. What is the benefit of "mixing and matching" financial institutions and their services? A. Minimizing service charges and other fees. B. Increasing risk due to increased investments. C. Maximizing the returns and features from combined accounts. D. Increasing the flexibility of managing funds.
A, C, D
The ________ converts interest rates compounded for different periods into comparable annual rates, allowing you to compare interest rates easily. A. YAY B. APY C. YTD D. APR
B
What is the name for comprehensive financial services packages offered by brokerage firms? A. Consolidated management accounts B. Asset management accounts C. Comprehensive management accounts D. Platinum management accounts
B
A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a contracted period of time that can range from 30 days to several years is called a A. demand deposit. B. negotiable order of withdrawal deposit. C. certificate of deposit. D. term deposit. E. None of the above are correct.
C
Pay yourself first refers to A. head out on a exotic vacation. B. buy the house you've always dreamed of. C. put money in a savings account. D. buy that car you've been wanting.
C
What is the FDIC? A. Federal Deposit Insurance Collective B. Federal Department of Insurance and Compensation C. Federal Deposit Insurance Corporation D. Federal Depository Insurance Committee E. None of the above are correct.
C
When you are considering different investment options and want to maximize your returns, be sure to compare the investments' A. quoted rates. B. APRs. C. APYs. D. None of the above
C
Which of the following financial institutions were originally established to provide mortgage loans to depositors? A. Internet banks B. Commercial banks C. Savings and loan associations D. Credit unions
C
Which of the following is not an advantage of a CD as a cash management alternative? A. CDs offer a wide selection of maturities. B. CDs are convenient to purchase. C. CDs offer liquidity. D. CDs have fixed interest rates, which are beneficial if interest rates drop. E. CDs are insured.
C
You have $5,000 in a 36 month Certificate of Deposit that has an APR of 3.75%. If inflation averages 4.25% during these 36 months, what is the real return on your CD? A. 8.0 percent B. 3.75 percent C. Negative .50 percent D. Negative 8.0 percent
C
Your bank, First Bank, charges you $1.50 every time you use an ATM that is not owned by them. Unfortunately, there is no First Bank ATM near your school. There is a Second Bank ATM in the Student Center, which you use several times a week to withdraw $10 at a time for lunch, video games, etc. What is the best piece of advice regarding these transactions? A. They will make it hard to balance your account since these transactions won't show up on your monthly statements. B. Make sure you have overdraft protection on your account. C. Avoid them since you are effectively paying 15% interest to access your cash. D. They're OK as long as you enter the transactions in your check register.
C
Financial institutions that provide traditional checking and savings accounts are commonly referred to as A. non−deposit−type financial institutions. B. financial brokerage companies. C. personal depository institutions. D. deposit−type financial institutions. E. None of the above are correct.
D
How do you compare cash management alternatives to determine which is best for you? A. Take into account their tax status. B. Compare returns using comparable interest rates. C. Consider their safety or risk. D. All of the above are correct.
D
The Johnson family is very conservative financially. They have a retirement plan where John works and share a joint checking account at their bank. They keep a lot of money in their checking account to cover shortminus−term needs and emergencies. Both of them want to step up to a higher interest rate than a checking or savings account pays, and at the same time stay with their bank. The Johnsons have been thinking about the financial principle minus− Pay Yourself First. Being very conservative, they might consider having their bank A. sell them a risky mutual fund. B. send them a monthly reminder to make a deposit in their 401(k). C. do a direct deposit of John's paycheck into their checking account. D. do a direct deposit of some of John's paycheck into a savings fund.
D
What is the name of an investment company that raises funds from investors, pools the money, and invests in stocks or bonds? A. Stockbrokerage firm B. Securities fund firm C. Bond brokerage firm D. Mutual fund firm
D
When college students start saving early A. by automating their savings, they are less likely to spend money. B. in an account earning interest, they immediately put their money to work. C. they can take advantage of the time value of money and achieve their financial goals. D. all of the above.
D
Which of the following characteristics apply to liquid assets? A. They are characterized by low returns. B. They involve low risk. C. The temptation to spend is greater. D. All of the above are correct.
D
Which of the following is not a liquid asset? A. CDs B. Checking accounts C. Money market funds D. Credit cards
D
Liquid assets or funds are important to A. prevent overdrafts in checking accounts. B. cover some planned expenses. C. cover unplanned expenses. D. prevent interrupting your long−term investments. E. All of the above are correct.
E
It is best for college students to wait and begin saving once they are "making more money." T or F
F
It is wise to wait until you are earning a substantial amount of money before you establish a disciplined financial plan for your future. T or F
F
A debit card is something of a cross between a credit card and a checking account. T or F
T
Because liquid assets can be turned into cash quickly and with little loss, they have little risk associated with them and therefore provide a low rate of return for the consumer. T or F
T
Liquid assets allow you to cover unplanned expenses without having to interrupt your long−term investments or liquidate any tangible assets. T or F
T
Non−deposit−type financial institutions are commonly referred to as mutual funds and brokerage firms. T or F
T
The National Credit Union Association is a federal agency that insures deposits at credit unions. T or F
T
The deregulation of the 1980s has allowed brokerage firms to offer traditional banking services, and has also let banks offer services formerly found only at investment companies. T or F
T
The interest rate earned on a money market deposit account is generally higher than the interest earned on a Bank savings account. T or F
T
When you automate your savings you are less likely to spend those dollars because they never become part of the funds in your checking account. T or F
T
After reading the new account insert in his monthly statement, Tony Mercadante determined that the FDIC considers a joint account as a separate depositor. He and his wife, Cynthia, have three accounts at ABC Bank & Trust, one joint account with a balance of $40870 and two individual accounts—his has a $139330 balance, and hers has a $253501 balance. What amount of FDIC coverage do Tony and Cynthia have on their accounts?
Tony's account balance of $139330 is completely covered as is their joint account of $40870 both accounts are under the $250,000 FDIC limit. Cynthia's account is over the insurance limit by $3,501, but their money would be covered if she moved some into their joint account or into another institution.
