PFIN: Chapter 4. Managing Your Cash and Savings

A disadvantage to using debit cards is if there is a problem with a purchase, you can stop payment as you could if you had paid by check or credit card. T/F

False

Asset management accounts (AMAs) are offered by depository financial institutions, such as brokerage firms. T/F

False

If you fail to notify your bank within 30 days of an error made on an electronic funds transfer, the bank has no obligation under federal law to conduct an investigation or return your money. T/F

False

Money market mutual funds (MMMFs) purchased at commercial banks are FDIC insured. T/F

False

Securities purchased through your bank are subject to deposit insurance protection. T/F

False

The Truth-in-Savings Act of 1993 allows banking institutions to avoid paying interest on any account in which the balance falls below a certain minimum amount for just 1 day. T/F

False

To purchase a $100 Series EE bond you'll need just $25. T/F

False

While financial markets generally reacted positively to the low rate policies by pushing up asset prices, low interest rates also tend to signal sluggish economic growth and the risk of inflation. T/F

False

A married couple can deposit up to $1,500,000 in several accounts at one bank and still be fully insured. T/F

True

Banks can initiate legal proceedings against account holders who intentionally overdraw their accounts. T/F

True

Debit cards and ATMs can be used at many retail and service outlets. T/F

True

If you lose your checkbook, there is no need to stop payment on each of the missing checks. T/F

True

The federal Electronic Fund Transfer Act of 1978 describes the rights and responsibilities of an electronic funds transfer systems (EFTS) user but does not allow for the stop payment on a defective or questionable purchase. T/F

True

You are likely to succeed in establishing a savings program if you make savings a priority in your budget and pay yourself first. T/F

True

Internet banks are which type of banking institution? a. commercial bank b. savings and loan association c. savings bank d. credit union

a. commercial bank

A checking account is an example of a a. demand deposit. b. savings deposit. c. time deposit. d. Both b and c are correct.

a. demand deposit

Bank service charges have ________ due in part to the growth of interest-paying checking accounts. a. increased sharply b. decreased sharply c. remained the same d. disappeared

a. increased sharply

The promised rate of interest paid on a savings deposit or charged on a loan is the a. nominal rate of interest. b. CD rate of interest. c. simple rate of interest. d. effective rate of interest.

a. nominal rate of interest

Which of the following is NOT an interest-paying checking account? a. negotiable order of withdrawal (NOW) accounts. b. certificates of deposit (CDs). c. money market deposit accounts. d. money market mutual funds.

b. certificates of deposit (CDs).

Features of safe-deposit boxes include the following EXCEPT: a. it takes two keys to open. b. keeping valuables in a safe-deposit box may reduce homeowner's insurance. c. banks insure the contents. d. it is an excellent storage place for important documents as long as you don't need those documents in a hurry.

c. banks insure the contents

All of the following describe savings deposits EXCEPT: a. they are referred to as time deposits. b. they earn higher rates of interest than checking deposits. c. the amount of the balance has no effect on the rate of interest. d. they are a type of liquid asset.

c. the amount of the balance has no effect on the rate of interest.

Accounts at which of the following types of depository institutions can be insured by a federal agency for up to $250,000? a. commercial banks b. savings and loan associations c. credit unions d. All of the above depository institutions can be insured by a federal agency for up to $250,000.

d. All of the above depository institutions can be insured by a federal agency for up to $250,000.

Which of the following is a factor that typically influences the choice of where to maintain a checking account? a. convenience of use b. services offered c. costs of services and/or interest rates offered d. All of these are important factors for most people.

d. All of these are important factors for most people.

A type of check that guarantees payment is a a. cashier's check. b. traveler's check. c. certified check. d. All of these types of checks guarantee payment.

d. All of these types of checks guarantee payment.

Efficient cash management helps people maintain a. adequate funds for household use. b. an effective savings program. c. control of frivolous expenses. d. All of these

d. All of these.

Examples of nondepository financial institutions include the following: a. stock brokerage firms. b. mutual funds. c. Neither a or b. d. Both a and b are nondepository institutions.

d. Both a and b are nondespository institutions.

Which of the following is not an example of liquid assets? a. money market deposit accounts b. money market mutual funds c. U.S. Treasury bills d. Series EE Bonds

d. Series EE Bonds

Which of the following is true regarding U.S. Treasury bills? a. T-bills mature after one year. b. T-bill interest is subject to state and local taxes. c. The minimum denomination for T-bills is $5,000. d. T-bills are sold on a discount basis.

d. T-bills are sold on a discount basis.

If you write checks for amounts greater than your balance, this would likely result in all of the following EXCEPT: a. longer holds when you deposit checks into your account b. penalty fees deducted from the checking account c. merchants refusing to accept future checks d. increased creditworthiness

d. increased creditworthiness

For any given nominal rate, which of the following types of compounding would result in the greatest effective rate? a. annual b. semiannual c. quarterly d. monthly

d. monthly