Personal Finance - Chapter 5

Saving funds for future use is necessary for financial Blank______.

Safety

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

True

Benefits of money market accounts include:

a favorable interest rate deposit insurance

The rent-to-own process is:

a lease and buy option.

The savings alternative that offers less liquidity is:

certificates of deposit.

Time deposits do not include: savings accounts. certificates of deposits. checking accounts.

checking accounts.

The main purpose of life insurance is to provide financial security for_________

dependents

Achieving your financial goals and carrying out your daily activities require many _________ services.

financial

Financial services will usually not be affected by:

historically lowest consumer prices.

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

investment companies

The savings alternative that offers more liquidity is: certificates of deposit. money market accounts.

money market accounts.

What types of financial institutions have federal deposit insurance through FDIC?

savings and loans commercial banks

Mobile Web banking with Internet access of the financial institution's website is one of the three methods to access financial service activities through a(n)__________ or __________

smartphone or tablet

The interest rates charged by pawnshops are regulated by Blank______. other pawnshops the federal government the state the pawn shop dealer association

the state

What is the purpose of liquidity?

to allow you to withdraw money on short notice

Institutions typically offering online banking include ______.

"brick-and-mortar" banks savings and loans Internet-only banks

Online payments do not include Blank______.

Smart cards

A___________________is a legal agreement that provides for the management and control of assets by one party for the benefit of another. This is a one-word answer.

Trust

A regular savings account usually does not have: a high rate of interest. difficulty in withdrawal. a high balance requirement. a low or no minimum balance requirement.

a high rate of interest. difficulty in withdrawal. a high balance requirement.

Financial services include:

investments. financial planning. insurance. savings. payment services. borrowing.

An account with two or more owners is called a Blank______.

joint account

The Blank______ process is defined as a store that leases products to consumers who will eventually keep the items after completing a certain amount of payments.

rent-to-own

A $500 savings account that earned $25 after a year would have a rate of return, or yield, of Blank______%.

5 Reason: 25/500 = 0.05 = 5%.

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 Blank______.

6%

Fraud charges should be reported within how many days of receiving your statement?

60 days

Electronic banking allows a customer to:

transfer funds for online payments of mortgage payments or rent. payments for online purchases. apply and receive approvals for loan. direct deposit checks.

You are in the 25% tax bracket, the before-tax savings rate of return is 12%, the after-tax yield on the savings account is:

9% Reason: You are given the before-tax rate of return, and asked to find the after-tax yield.

__________deposits include checking accounts and other payment methods. This is a one-word answer.

Demand

True or false: Pawn shops are only used during economic downturns.

False Reason: Even in economic prosperity, short-term loans are often needed.

Select the bonds that are a type of federal savings bond. I EE HH LL

I EE

Another name for an asset management account is:

a cash management account.

A savings plan that requires a certain amount of money to be left for a specified amount of time, subject to penalty for early withdrawal, is called a Blank______.

certificate of deposit

Insurance is a(n) Blank______.

financial service

Drawbacks of money market accounts include:

higher minimum balance required. some institutions charging for low balances. Not insured

True or false: Credit alternatives are only for people of limited resources.

Falsecorrect Reason: Correct. Credit options are available for people of all different levels of financial ability.

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

Falsecorrect Reason: Correct. The ability to transfer money leads to increased liquidity and is an essential element of daily business activities.

______ bonds are not a type of federal savings bond. Municipal EE I

Municipal

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

True

True or false: The rate of return you earn on your savings account should be compared with the inflation rate.

True Reason: In general, as the inflation rate increases, the interest rates offered to savers also increase. This gives you an opportunity to select a savings option that will minimize the loss in value of your dollars on deposit.

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

beats the rate of inflation.

A common trade-off (opportunity cost) for financial services includes having to keep money in accounts longer to obtain higher interest rates. This leads to reduced Blank______.

liquidity

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

money market

Which of the following exists primarily to provide loans to purchase homes? insurance companies finance companies mortgage companies credit card companies

mortgage companies

The rate of return is:

the percentage increase in the value of an account.

What is the main function of a finance company?

to make loans to consumers and small businesses

What is the main function of a mortgage company?

to provide loans to purchase homes

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

True

True or false: Achieving your financial goals and carrying out your daily activities require various financial services.

True