UNIT: BANKING, FINANCIAL INSTITUTIONS, AND INSURANCE
Greg invests $2,680 in a CD paying 7.0% interest, and $3,060 in an online savings account paying 4.5% interest. How much more interest will the CD have earned than the savings account after 1 year?
$49.90
Tony invested $5,500 in a four-year CD that paid 4.8% interest, but later needed to withdraw $475 early. If the CD's penalty for early withdrawal was three months' worth of interest on the amount withdrawn, how much of a penalty did Tony pay?
$5.70
Orlando invested $16,000 in an eight-year CD bearing 6.5% simple annual interest, but needed to withdraw $3,500 after five years. If the CD's penalty for early withdrawal was one year's worth of interest on the amount withdrawn, when the CD reached maturity, how much less money did Orlando earn total than if he had not made his early withdrawal?
$910.00
How is email a useful component of online banking? I. Email alerts can be used to warn you before you overdraw your account. II. You can have your bank statements emailed to you, getting them to you faster. III. Only emailed bank statements can be used to support electronically-filed tax returns
1 and 2
Which of these can be considered "online banking?" I. A brick-and-mortar bank that allows its customers to transfer money online. II. A bank that has only a few branches but has customers depositing money online. III. A bank that does not exist as a real building, but only has an internet presence.
1,2,3
How is a 401k different from an individual retirement account (IRA)?
A 401k is created by an employer who may match contributions.
Which of these are considered both short- and long-term investments? Select four options.
CD's stock mutual funds commodities
Why do certificates of deposit tend to offer better interest rates than money market accounts?
Certificates of deposit involve a longer time commitment than money market accounts, so they carry a greater return.
Which of these is an advantage of checking accounts?
Checking accounts allow convenient ways to deposit or withdraw funds.
Which of the following are advantages of certificates of deposit (CDs) over savings accounts? I. CDs are more readily accessible than savings accounts. II. CDs offer greater interest rates than savings accounts. III. CDs have greater FDIC backing than savings accounts.
II only
Which statements apply to a certificate of deposit (CD)? Choose two answers.
It can be purchased from a banking institution. It can be purchased for almost any amount.
How can avoiding speeding tickets affect an automobile insurance policy?
It can help keep premiums down.
What impact might an economic downturn have on a borrower's fixed-rate mortgage?
It has no impact because a fixed-rate mortgage cannot change.
What is one benefit of submitting a claim to an insurance company?
It helps to cover any expenses for a loss.
Which statement best defines the term premium?
It is a fee paid to an insurance company to purchase coverage.
Which statement best defines the term deductible?
It is a payment made before a consumer can make a claim.
Which statement best defines the term copayment?
It is money paid by a consumer to share the cost of a payout.
Which scenario best describes purchasing property insurance?
Mitchell buys insurance to protect his new stereo system.
Select the correct statement and rationale relating the interest rates of online banks to those of traditional banks.
Online banks offer greater interest rates than traditional banks because they have lower overhead costs.
Which fixed expense would be most difficult to change if money is needed for car payments?
Rent
Daniel wants to buy a laptop computer, and he has $300 in savings. He can purchase a new computer for $279 or a refurbished [repaired or renovated] computer for $100. What should Daniel do next?
Review the pros and cons of the different available computers.
What is one benefit of purchasing saving bonds?
Saving bonds are purchased from the government and guaranteed to increase in value.
Which describes the difference between simple and compound interest?
Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued.
Ian invests $13,670 in a savings account at his local bank which gives 1.9% simple annual interest. He also invests $6,040 in an online savings account which gives 4.5% simple annual interest. After nine years, which one will have earned more interest, and how much more interest will it have earned, to the nearest dollar?
The online account will have earned $109 more interest.
Which statement best describes how lenders determine borrowing conditions for a customer?
They access the customer's credit reports.
Which statement best describes stocks?
They are an investment in a company's progress and profits.
Which is most likely to happen to consumers with good credit?
They can be approved for loans. They can receive lower interest rates. They can use credit in emergencies.
The Jones family would like to buy a home, but they have a large amount of debt that has led to a weak credit score. What step could the Jones family take to improve their credit?
They could hire a financial adviser to figure out how to pay off their debt.
Which are common mistakes people make when investing? Check all they apply.
They put all of their money into one kind of investment at a time. They invest more money than they can afford. They focus heavily on familiar investment opportunities. They hold onto investments longer than they should to recoup losses.
Which person is a victim of identity theft?
Thomas, whose credit card information was stolen and maxed out at a jewelry store
Some online banks offer "online bill pay." What does this mean?
You can visit your bank account online and electronically transfer funds to pay your bills.
Which investment has the least liquidity?
a 401k
Glenn and Maggie own a regional chain of juice bars and are looking to expand in the coming year. They already have fifty shops, but they know they will need a loan to reach their goal of one hundred twenty five shops. Which type of banking institution is most suitable for Glenn and Maggie's business?
a commercial bank
William is not generally a risk-taker, but he knows he may need to step out of his comfort zone to make enough money for retirement. Which investment option would best meet William's needs
a commodity
The type of credit people are most likely to use for small purchases during their lifetime is
a credit card
What best determines whether a borrower's interest rate on an adjustable rate loan goes up or down?
a markets condition
People in financial trouble are advised to contact creditors to negotiate a
a payment plan
Which is the most important consideration when deciding to purchase or lease a vehicle?
all current and monthly expenditures
Some major considerations when deciding on housing are needs and
budget
The safest way for someone to make an online purchase is to
buy from a reputable website
A couple has decided to increase their income from investments for when they retire in twenty years. Which is the best way they can accomplish that goal?
by enrolling in a 401k and investing in the stock market
Buying a new car can create a financial challenge because
car payments must become part of the budget.
What does reconciling an account involve?
checking one's financial records against the bank's
Filing for bankruptcy can make it hard for a consumer to reestablish and obtain
credit
Which information is included on a person's credit report? Check all that apply.
current credit cards and loans total amount of money owed whether bills are paid on time how much money lenders will loan
Which expense category will most likely be changed to allow money for the purchase of a car?
entertainment
How is a savings account most useful?
for using money in the near future but not right away
The best way a bank can protect a victim of identity theft is to
freeze the account
When making a decision about housing, the first step should be
gathering information on available housing.
What is a benefit of obtaining a personal loan?
getting large amounts of money to use immediately
Homeowners typically pay property taxes to
help finance state and local governments.
What is the definition of liquidity?
how easily an investment can be exchanged for cash
Sara would like to open a bank account. What will she need to do this? Choose three answers.
identification card money to start the account proof of address
What is the first step in the decision-making process?
identify the choices
Checking a credit report is a good way to
know whether your credit is improving
Insurance is a financial service that allows a customer to share
liability with a company
Which form of government insurance provides medical care to senior citizens?
medicare
An example of secured credit is a
mortgage
Which of these investments may be long term? Choose four answers.
mutual funds bonds retirement funds commodities
When people take out a mortgage, they must pay back the money
over time, usually many years.
If someone buys a home for $200,000 and makes a 20 percent down payment, that person will have to
pay $40,000 up front.
A way to build good credit is
paying bills when they are due.
A credit score is based in part on
payment history and total debt
What do insurance companies pay to compensate consumers after a loss?
payouts
A balloon payment mortgage makes the best sense for borrowers who are
planning on selling their homes before the term of the loan ends.
In a mortgage, the amount of money borrowed is called the
principal
Both mortgages and auto loans
require a down payment
When revising a budget, it is important to make choices that allow you to continue
saving money
Which investment is best for someone who is likely to need cash soon?
savings account
Which is an example of a high-risk investment?
stock in a start-up company
Money that has been spent and cannot be recovered is known as
sunk costs
Who regulates markets where investments are traded?
the federal governments
Where do banks get money to lend to borrowers?
their depositors
Which of these is a characteristic of certificates of deposit (CDs)?
they last for a set period of time
People who make money investing in the stock market
they must pay tax on profits
Which are benefits of purchasing insurance? Check all that apply.
to gain greater confidence and security to be prepared for problems or changes to have protection if something goes wrong
Which of these is the best reason for Nina to monitor her bank account statements online or on her cell phone app?
to know how much money she has for budgeting
Which best describes a way people can use personal loans?
to pay for college
What is the best reason for homebuyers to create a budget before taking out a mortgage?
to plan how to pay off the money they have borrowed
When planning a budget, the biggest consideration should be the
total income to spend
