PF Chapter 4

Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $100 and earns 5 percent interest per year?

$5.25

Check-cashing outlets do not offer which of the following services?

Payday loans

Which of the following services do savings and loans offer

Savings accounts Mortgages

Deposit institutions would not include a:

brokerage firm

The biggest advantage of using APY is:

easy to compare rates

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

money market

Life insurance has other uses, including:

savings alternatives providing for dependents investment options

Concerns of online banking include:

security violations. overspending due to ease of access. online scams.

A Savings Bond that has an interest rate based on two components is a(n):

I bond

A failure to reconcile your bank account each month can result in not knowing which of the following?

If your bank is overcharging you for fees.

A current shortage of cash can be overcome by liquidating savings or borrowing

TRUE

Redeemed EE bonds may be exempt from federal income tax if the funds are used to pay tuition and fees at a college or qualified technical school for yourself.

TRUE

Time deposits include money in savings accounts and certificates of deposits

TRUE

A major concern with prepaid debit cards is which of the following?

The high fees often charged

A customer has more security in case of fraudulent transactions when a debit card is processed like a(n) _____.

credit card

Financial services are now offered by:

credit card companies insurance companies investment brokers

A regular savings account usually does not have

overdraft protection. a high balance requirement. a high rate of interest.

Indexed CDs have rates that vary with the:

stock market

The rate of return is

the percentage increase in the value of an account

Overdraft protection is an automatic loan made to checking account customers to cover checks written in excess of:

their balance

Redeemed EE bonds can avoid federal taxation if:

used to pay college tuition and fees.

If there is a shortage of cash, you will have two basic choices to cope with the situation: ____________from a savings or____________

Blank 1: spend, spending, withdrawing, or withdraw Blank 2: borrow, borrowing, loan, or loans

A _________ is a legal agreement that provides for the management and control of assets by one party for the benefit of another.

Blank 1: trust

Concerns of online banking include

convenience for transactions e-mail notices for due dates time savings

Another name for an automated teller machine (ATM) is:

A cash machine

Using savings for paying __________ expenses is one of the mistakes people make when managing current cash needs.

current, immediate, daily, routine, normal, regular, everyday, personal, or present

A certificate of ___________ is a savings plan requiring that a certain amount be left on deposit for a stated time period.

deposit

A _____________ savings bank is owned by depositors and specializes in savings and mortgages.

mutual

Credit alternatives to be used for borrowing if an individual needs more cash than is available include:

personal loans. credit card cash advances.

You are in the 25 percent tax bracket. So, the yield on the savings account is 8 percent, and the after-tax savings rate of return is ______ percent.

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Benefits of online banking include:

convenience for transactions e-mail notices for due dates time savings

Place the steps to writing a check in rank order from first to last. This is taken directly from the text.

1. Record the date 2. Writing the name of the person receiving the funds 3. Record the amount of the check in figures or numbers 4. Write the check in words 5. Sign the check 6. Note the reason for the payment

The steps in writing a check include:

noting the reason for the payment signing the check recording the date recording the amount of the check in numerals writing the amount of the check in words writing the name of the person receiving the funds

Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $200 and earns 6 percent interest per year?

$12.72

A __________ card is the document that records the official signatures of the person or persons authorized to write checks on the account.

Blank 1: signature

A ______________ savings bank is owned by depositors and specializes in savings and mortgages.

commercial

Which of the following are not proper actions to take if you are a victim of identity theft?

Ask your friend to help you find the thief. Leave the area until the problem is resolved. Locate the person who stole your identity.

___________banks are organized as corporations, with investors contributing the capital for operations.

Blank 1: Commercial

__________is a process that calculates interest based on previously earned interest.

Blank 1: Compounding or Compound

__________deposits include checking accounts and other payment methods.

Blank 1: Demand or Checkable

_________is the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees. This is taken directly from the text.

Blank 1: Liquidity

A __________ check is a personal check with guaranteed payment.

Blank 1: certified

A __________ bank is a financial institution that offers a full range of services

Blank 1: commercial

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

Blank 1: dependents, dependents, survivors, children, offspring, heirs, spouse, family, beneficiary, or beneficiaries

Mutual savings banks are owned by ____________

Blank 1: depositors or depositor

A(n) _________ is your signature on the back of the check

Blank 1: endorsement

Money market accounts are insured by federal deposit insurance, whereas money market mutual ____________ are not.

Blank 1: funds or fund

A(n) ___________ CD has earnings based on the performance of the stock market.

Blank 1: indexed or index

To achieve long-term financial goals, many people trade off _________ for a ________ return.

Blank 1: liquidity Blank 2: higher, high, greater, or larger

The rate of _________ is the percentage increase in the value of savings as a result of interest earned.

Blank 1: return or interest

A _________ and loan association traditionally specializes in savings accounts and mortgage loans.

Blank 1: savings or saving

A __________ draft account is an interest-bearing checking account at a credit union.

Blank 1: share or shared

Which of the following are considered demand deposits?

Checking accounts Payment accounts

Which services do mortgage companies typically not offer?

Checking accounts with unlimited withdrawals Frequent access to cash machines Savings accounts with high interest rates

Which services do finance companies typically not offer?

Checking accounts with unlimited withdrawals Savings accounts with high interest rates Frequent access to cash machines

What types of financial institutions have federal deposit insurance?

Commercial banks Savings and loans Credit unions

What is not typically a basic concern of a financial services customer?

Does the bank offer tax preparation services?

Credit alternatives are only for people of limited resources.

FALSE

Debit cards allow you to wait to deduct the amounts from your account.

FALSE

One criterion for choosing a saving plan is the rate of return.

FALSE

Some of the basic concerns of a financial services customer when comparing financial services include which of the following?

Will I be able to borrow money when I need it? Where can I get the best return on savings? How can I minimize costs for checking and savings?

The ____________ percentage yield is the rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365-day period.

annual

The Blank______ is the percentage rate expressing the total amount of interest that would be received based upon time and compounding.

annual percentage yield

Share draft accounts at a credit union:

are interest bearing until a minimum balance is maintained.

EE bonds are exempt from state and local taxes, but federal income tax is typically due

at redemption

A specific stop-payment order given to a bank is designed to:

avoid paying a specific check that is lost or stolen.

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

beats the rate of inflation

Money market accounts at commercial banks are insured by ______, whereas money market funds are not.

federal deposit insurance

The Truth in Savings Act requires the following items to be disclosed:

fees on deposit accounts. other terms and conditions of the savings plan. the annual percentage yield (APY). the interest rate.

The two parts of interest on an I bond are a(n):

fixed rate of interest for the life of the bond. inflation rate that changes semiannually.

There is a trade-off between liquidity and:

higher return

Common choices for making payments include all of the following except:

installment loans

Some tax advantages of EE bonds are that:

interest is exempt from state and local taxes. there is no federal income tax until redeemed.

A trust is a legal agreement that:

is created by one party for benefit of another. provides control of assets. enables management of assets.

Common mistakes made when managing current cash needs include:

lacking sufficient liquid assets to pay current bills. using savings for current expenses. overspending. leaving funds in low-interest accounts too long

Selection of a savings plan is influenced by:

liquidity. rate of return. safety. restrictions and fees.

Benefits of U.S. savings bonds include

low minimum deposit. exemption from state and local taxes. government guarantee.

A drawback of U.S. savings bonds is:

lower rates for early redemption

A $200 savings account that earned $8 after a year would have a rate of return, or yield, of ______ percent. (Assume annual compounding.)

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