Chapter 5

The Federal Deposit Insurance Corporation (FDIC) insures deposits at commercial banks for up to __________ per depositor.

$250,000

Jessica inherited $282,000 from her grandfather which she used to buy a certificate of deposit at a local bank. However, the bank was just declared insolvent and taken over by federal regulators. How much money will Jessica potentially lose?

$32,000 Jessica inherited $282,000 from her grandfather which she used to buy a certificate of deposit at a local bank. However, the bank was just declared insolvent and taken over by federal regulators. Jessica could potentially lose $32,000 since the CD is only guaranteed up to $250,000.

What is the after-tax return on a money market mutual fund if it is currently paying 3% and you are in a 28% marginal tax bracket?

2.16%

A certificate of deposit, or CD, pays a fixed rate of interest on deposits ranging in term from:

30 days to several years.

__________ is an interest-paying checking account issued by some deposit-type financial institutions.

A NOW account

The __________ converts interest rates with different compounding frequencies into a comparable annual interest rate so investors can make accurate comparisons.

APY

Which of these is considered a deposit-type financial institution?

Bank

Which of these is not one of the three Cs of choosing a financial institution?

Collateral

Which of these is an advantage of online banking?

Convenience

Which of these accounts is not federally insured?

Money market mutual funds

Which of these is considered to be a liquid asset?

Money market mutual funds

Any cash transfer that takes place automatically is known as:

an electronic funds transfer.

Determining how much money to keep in liquid assets and where to keep it is the subject of:

cash management.

A card that allows you to access your bank account electronically is known as a:

debit card.

Jill recently bounced a check and is upset about the fees that she was charged. Which of the following strategies will be most helpful in avoiding this situation in the future?

establish overdraft protection

Liquid assets are __________ risk and generate __________ returns.

low; low

Jason just agreed to purchase a couch from an individual who is not willing to accept a personal check. The post office is just around the corner and Jason knows he can purchase a __________ there to cover the transaction.

money order

Financial planners recommend __________ to make it easier to save.

paying yourself first

Jorge wrote a check to a local vendor prior to inspecting the vendor's work on his house. However, after inspection he is dissatisfied with the quality of the work. Assuming the vendor has not cashed the check Jorge can:

put a stop payment on the check.

T-bills are short-term debt issued by the U.S. Treasury that are considered to be:

risk-free.

A physical storage location at a financial institution that you can rent and use to store important documents and other small items is known as a:

safety-deposit box.

A ______ is similar to a debit card, but differs because the card itself magnetically stores its own accounts.

smart card

Some people may postpone saving for retirement since there is so much uncertainty surrounding the future. In behavioral finance this tendency to discount the future is known as:

temporal myopia.

Financial planners recommend having an emergency fund that should only be used for:

unexpected events.