test 2

Savings institutions accept deposits and provide mortgage and personal loans to individuals. Another name for these types of financial institutions is A) Trust institutions B) Economy institution C) Insured institution D) Thrift institution

D) Thrift institutions

Financial institutions offering traditional checking and savings accounts as well as providing loans to both individuals and firms are called __________

Depository institutions

ATM cards are declining in use because they are expensive and the machines are becoming difficult to locate.

False

Bank fees for use of an ATM are not usually a large consideration in choosing a bank with which to do business

False

Debit Cards allow you to pay for a purchase later when the bill arrives

False

In general, the more liquid an asset, the higher its return

False

In order to have a safety deposit box at a bank, a person needs to also maintain another checking or savings account at that bank

False

Introductory high interest rates paid by financial institutions for new accounts are usually a good deal and you should therefore take advantage of them without question

False

Liquidity refers to your ability to cover any long-term cash deficiencies

False

Money management has no relationship to the personal cash flow statement

False

Securities firms primarily sell insurance to protect individuals from adverse events

False

To achieve both liquidity and an adequate return, you should consider investing in only one money market investment with a fixed interest rate and a long maturity date.

False

You can be assured that if your ATM query shows you have a certain balance in your checking account, that figure is more accurate than the amount in your check register

False

Which of the following financial institutions would be used the most by business customers wishing to borrow money? A) Commercial Banks B) Savings institutions C) Credit Unions D) All are used equally

A) Commercial Banks

AN _______ card allows you to pay for a purchase at a later time when the bill arrives A) Credit B) Debit C) expense D) ATM

A) Credit

Which of the following financial institutions specializes in making personal loans to people who are perceived to have a higher risk of default A) Finance Companies B) Commercial Banks C) Savings Institutions D) Credit Unions

A) Finance Companies

________ Are non-depository institutions that sell shares to individuals and use the proceeds to invest in securities to create mutual funds A) Investment Companies B) Finance Companies C) Securities Firm D) Insurance Companies

A) Investment Companies

In general, the more liquid an investment is, the ________ the turn you will receive A) Lower B) Higher C) Less predictable D) There is no relationship

A) Lower

Deposits at commercial banks are insured by a government owned insurance agency called

Federal Deposit Insurance Corporation

Organizations that offer a diverse set of financial services to individuals and firms are

Financial Conglomerates

A non-depository institutions facilitating transactions in stocks or bonds is an __________

Securities Firm

A debit card differs from a credit card in that it does not provide credit, instead, it deducts the purchase from your checking account immediately

True

A mutual fund is a means by which investors with only a small amount of money can invest in a portfolio of securities

True

Bank ATM charges may be substantial if you make many transactions monthly and use out of network machines

True

Cashiers checks, money orders, and traveler's checks are secured check alternatives to a personal check and therefore are more risk free for the payee

True

Credit unions are nonprofit depository institutions that serve members who have a common affiliation (such as the same employer or some community)

True

Depository institutions are financial institutions that accept (that are insured up to a maximum level) from individuals or firms and provide loans

True

Good cash management requires some liquidity, but excessive liquidity has an opportunity cost.

True

Liquidity is necessary because there are times during the year when your cash inflows are not adequate tp cover your cash outflows

True

Maintaining liquid assets that you can easily access when you need funds allows you to avoid using credit and paying finance charges

True

Money management is a series of decision made over a short-term period regarding cash inflows and outflows.

True

Non-depository institutions are financial institutions that provide various financial services, but their deposits are not federally insured

True

Savings institutions differ from commercial banks in that they tend to focus less on providing commercial loans

True

To prevent an overdraft or "bounced checK" it is always a good idea to record your check written in your check register and reconcile your account balance when you receive your monthly bank statement

True

you should attempt to have a sufficient amount of funds in liquid assets to draw on when your cash outflows exceed your cash inflows

True

An example of a depository financial institution is an insurance company

false

Deposits in commercial banks which are members of the FDIC, are insured up to a 50,000 per account

false

Finance companies are more selective in choosing the lender they serve, and therefore usually charge lower interest rates thank banks or credit unions

false

To achieve both liquidity and an adequate return, you should consider in investing in

multiple money market investment with varied returns and levels of liquidity.

Your great aunt Mary passed away and left you and inheritance of $5,000. Since you don't have a need for the money in the near future, which of the following would be the best place to put the 5,000 A) Savings account earning 1% B) Checking Account C) 5 year CD paying 4.38 annualy D) High risk stock in a producer of natural gas

C) 5 year CD paying 4.38 annually

To join a credit union, you need to A) Have a steady job B) Be a member of a group with a common bond C) Have established good credit D) Be sponsored by an existing member of that credit union

B) Be a member of a group with a common bond

Which of the following is NOT a depository institution A) First National Bank of Chicago B) Butterfield Brokerage Firm C) American 1 Credit Union D) New England Savings Bank

B) Butterfield and Edwards Brokerage Firm

Which of the following is not a service that a depository institution might offer? A) Checking services B) Credit counseling C) On line services D) The use of a debit card

B) Credit Counseling

An ______________ card allows you to pay for a purchase directly from your checking account without writing a check. A) Credit B) Debit C) Expense D) Travel

B) Debit

Financial institutions that accept deposits (that are insured up to a maximum level) from individuals and provide loans are called A) Finance Companies B) Depository instituions C) Investment companies D) non-depository institution

B) Depository Institution

If you were taking out a personal loan, the highest rate would probably be charged by a A) Commercial bank B) Finance company C) member of your family D) Credit Union

B) Finance Company

if you have $10,000 that you do not currently need for expenses and you wish to put it somewhere so that it will earn interest, which of the following institutions would you NOT choose? A) Savings institution B) Finance Company C) Securities Firm D_) Investment Company

B) Finance Company

Financial institutions loan funds at a __________ they pay depositors A) lower interest rate than B) Higher interest rate than C) Rate equal to what D) Cost plus 3% of what

B) Higher interest rate than

Which of the following will not vary at a commercial bank A) Interest Rates B) Limit on FDIC insurance on accouts C) Loan conditions D) Service Fees

B) Limit of FDIC insurance on accounts

Which of the following does money management not involve A) A series of decisions B) Long-term time period C) Cash inflows D) Cash outslows

B) Long-term time period

_______ management is a series of decisions made over a short-term period regarding cash inflows and outflows A) Cash B) Money C) Liabilities D) Assets

B) Money

A disadvantage of using credit as a source of liquidty is the A) Inconvenience of using credit B) Potential cost of finance charges C) Acceptability of credit by creditors D) poor records available after credit use

B) Potential cost of finance charges

Which of the following is NOT a depository institution

B) Securities Firm

__________ are non-depository institutions that facilitate the purchase or sale of securities by firms or individuals by providing investment banking services and brokerage services. A) Finance Companies B) Securities Firm C) Insurance Companies D) Investment Companies

B) Securities Firm

Which of the following is not an advantage of using ATM Cards A) It;s easy and convenient to withdraw funds B) Your total banking expenses are likely to lower C) you have access to your account any time of the day D) You can bank at remote locations all over the world

B) Your total banking expenses are likely to be lower

Which of the following is classified as a non-depository institution A) Credit Union B) Insurance Company C) Commercial bank D) Savings and loan

B) insurance company

Deposits at a commercial banks are insured up to _______ per depositor by the federal deposit insurance corp. (FDIC) A) 100,000 B) 75,000 C) 250,000 D) 150,000

C) 250,000

A financial conglomerate offers a diverse set of services that include which of the following A) Credit Cards B) Brokerage subsidiary C) Personal Loans D) All of the above

D) All of the above

Generally, yields are _______ for securities that are exposed to __________ liquidity risk. A) Higher; More B) Higher; Less C) Lower; Less D) Both

D) Both

The act that allows banks to transmit electronic images of checks, thus allowing funds to be transferred immediately is known as A) Check 2004 B) The check Clearing act of 2004 C) Fraud detecting Act D) Check 21

D) Check 21

Which of the following is NOT a disadvantage of using ATM Cards. A) Forgetting to record the transaction B) Fees from your bank and other banks for using out-of-network machines C) Increased fees if you make too many transactions per period D) Difficulty in withdrawing Funds

D) Difficulty in withdrawing funds

Which of the following is a nonprofit depository institution that provides services only to members who have a common affiliation A) Commerical Banks B) Savings Institutions C) Credit Unions D) Finance Companies

C) Credit Unions

_________ are non-depository institutions that provide insurance to protect individuals or firms against possible adverse events A) Finance Companies B) Securities Firm C) Insurance Companies D) Investment Companies

C) Insurance Companies

your ability to cover any short-term cash deficiencies is called A) Solvency B) Wealth C) Liquidity D) Cash Planning

C) Liquidity

You have 3,000 that you may need any day to replace the furnace in your house. Which of the following would be the best place to put 3,000 A) A one year CD earnings 4% B) A common stock mutual fund earning 9% C) Savings account earnings 2% D) Shares of stock in a high tech company that could double in 6 months

C) Savings account earning 2%

Which of the following characteristics is common to both commercial banks and credit unions A) Lower Fees B) Lower credit card rates C) insurance up to 250,000 D) nonprofit

C) insurance up to 250,000