Bank Test

Brandy made a withdrawal of $50 cash from an ATM that was not in her network. Assuming that her bank charges $2 for out-of-network withdrawals and the network she withdrew her money from charges $2, how much will her account be debited in total?

$54

List three reasons why it is important and convenient to have a bank account.

-Keep accurate records of all transactions -Provide a safe place for people to keep their money -Provide financial services -Bill paying convenience -Can use debit card instead of carrying cash

You have just inherited $230,000 from your great uncle and have decided to deposit the money into your local bank! The bank will pay you an interest rate of 3%. Determine the balance of your investment and the interest earned at the end of 8 years if: 1. Interest is compounded annually 2. Interest is compounded semi-annually 3. Interest is compounded quarterly 4. Interest is compounded monthly

1. BALANCE = $291,357.12 INTEREST EARNED = $61,357.12 2. BALANCE = $291,866.66 INTEREST EARNED = $61,866.66 3. BALANCE = $292,125.58 INTEREST EARNED = $62, 125.58 4. BALANCE = $292,299.76 INTEREST EARNED = $62, 299.76

Caleb withdrew $100 from his checking account. However, he used an ATM that was not in his bank's network. Assuming his bank charges $2 for that service and the bank he used charges $3, how much will his checking account be debited?

100 + 2 + 3 = 105

Congress established the FDIC (Federal Deposit Insurance Corporation) in what year?

1933

Rashaun has $225 in his checking account but has written two checks that have not cleared yet for $23 and $67.50 respectively. Does he have enough money in his account to make his car payment of $202?

23 + 67.50 = 90.5 225 - 90.5 = 134.5 134.5 - 202 = (67.5) No

Jerry has $321,000 in a bank account at his local bank. The account he has his money in is FDIC insured. How much does he stand to lose if the bank goes out of business?

321,000-250,000 =$71,000

Emily logged into her checking account from her computer. She had written three checks for $34.15, $45.98, and $121.15. Only the last check was posted to her account. How much money does she have tied up in outstanding checks?

34.15 + 45.98 = 80.13

Sherry's previous checking account balance was $532.14 at the end of the month. Before the month ended she wrote a check for $46.19 and one for $138.32. She also made a $200 deposit into her account. Assuming her monthly service charge is $6, what is her new balance at the end of the month?

46.19 + 138.32 = 184.51 347.63 + 200 - 6 = 541.63

Ben wrote a check for $52 more than he had in his account. The bank charges $25 for bounced checks and the local business that accepted his check charges $20 for bounced checks. How much in total would Ben have to pay for that one check?

52 + 25 + 20 = 97

Marvin deposited $400 in his checking account but also wrote check for $224.21 and $311.34. Assuming his original balance before deposits was $622.43, how much will he have in his account after the new deposit and two checks?

622.43 +400 = 1022.43 224.21 + 311.34 = 535.55 1022.43 - 535.55 = 486.88

What is the purpose of a check register?

A person can keep track of all deposits to and withdrawals from the checking account

Annual Percentage Yield

A standardized way to compare banks

Money Market

A very low risk, low yield investment with a checking account attached to it

What is the FDIC (Federal Deposit Insurance Corporation)? How much insurance coverage does the FDIC provide?

An independent government agency that insures accounts up to $250,000 at almost all U.S. banks

Bank

An institution, chartered by the state or federal government that takes deposits and provides credit and other financial services

Simple Interest

Based upon the annual principal only

P ( 1 + R / N ) N * T

Compound Interest formula

Explain how a debit card differs from a credit card

Debit cards withdraw from your checking account Credit cards allow you to borrow money

How might use of a debit card create problems in your checking account?

Insufficient funds

What is a credit union?

It is a nonprofit business that functions like a bank and is owned by its members

What might happen if people did not have confidence in the banking system?

People wouldn't deposit money. If no money in banks businesses can't borrow, won't build new factories, open shops, hire new workers. The entire economy will suffer.

What role does the Fed play in banking?

Regulates banks, making sure they follow rules and practices designed to ensure a sound banking system

PxRxT

Simple interest formula

Explain the function(s) of the Federal Deposit Insurance Corporation(FDIC)

The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. Insured up to $250,000.

Principal (P)

The amount borrowed or invested

Why did the government establish the FDIC?

The government wanted to protect people from losing their money if the banks failed

Interest Rate (R)

The percentage of the principal gained or paid by investors

Why do people sometimes have to use a cashier's check instead of a personal check?

The person is buying a large item such as a car and the dealership will only accept a check that is charged against the bank's account

Check cashing fee

The rate a business can charge for cashing a check

Why do banks require a person to have a PIN number in order to use an ATM?

They require the number to be used along with a debit card or ATM card to help protect the person from theft

Certificates of Deposit

This type of account has a fixed term before you are able to withdraw your investment. There is a penalty for withdrawing your money before maturity date.

Why do you think it is important for banks across the country to follow similar rules?

To ensure that no one bank becomes too powerful

All banks must follow state and federal government regulations

True

Compound Interest

based upon the annual principal and any interest earned on the principle

An account into which a person deposits money and then can withdraw funds by making a written order to the bank instructing it to pay money from the account to another person or a business is known as a

checking account

Most banks do not

sell corporate stock to the public