Chapter 4: Savings and Payment Services
Quentin wants his retail purchases to be deducted directly from his checking account. Which of the following tools should he use?
Debit card
Aidan wants to be able to complete his payment transactions electronically. Which of the following tools should he use?
Debit card, Online payment, Stored-value card, and Smart card
Which of the following is NOT required when writing a check?
Driver's license number
A joint account with Sara and Ean allows
Ean and Sara to both write checks on the account
Investments and tax assistance, both tools for financial planning, are also known as
Financial services
Which of the following is correct about inflation?
In order to increase buying power, you need to earn a rate higher than the rate of inflation
Preston never opened his bank statements, so he was surprised to see that he received a service charge that exceeded the interest he earned for the month. What kind of account does Preston have?
Interest-earning checking account
Will wants to open up an account that will allow him easy access to his funds from many locations and would pay at least a low interest rate. What kind of account should he open?
Interest-earning checking account
Which of the following usually offers mutual funds?
Investment company
When Angela wanted to provide financial security for her dependents, she considered purchasing a specific type of account at a
Life insurance company
Which of the following refers to the opportunity to withdraw money on short notice without incurring a loss in value?
Liquidity
A credit cards is a type of
Loan
A drawback of a regular savings account is
Low rate of return
A drawback of a savings account is
Low rate of return
Justin needs to have access to his money in 5 months. the best option for his savings is
Money market account
Zach wants to open up an account, but he doesn't know which kind is appropriate. He is interested in earning a higher interest rate and knows that he might not be able to write many checks from his account. In addition, he plans to keep at least $1,000 in his account so he can avoid paying a fee. He definitely wants to have federal deposit insurance. What kind of account should he open?
Money market account
Amber wants to open up an account, but she doesn't know which kind is appropriate. She is interested in earning a higher interest rate and plans to keep at least $1,000 in her account so she can avoid paying a fee. Amber wants to open her account at an investment company. What kind of account should she open?
Money market fund
Kylie went to a post office to obtain a
Money order
Which of the following primarily provides loans for home purchases?
Mortgage company
Which of the following provides deposit insurance for credit unions?
NCUA
Harvey needed some cash quickly, so he received a short-term loan based on the value of an old ring. Where did he go?
Pawnshop
When Imogene brought a necklace to a ______, she received a loan based on its value.
Pawnshop
All of the following are non-deposit institutions except
Payday loan company
Which of the following will likely provide the most expensive access to funds?
Payday loan company
Louise got caught in a cash flow trap and needed money quickly. Unfortunately, she didn't shop around and she went to a ______. As a result, her annual percentage rate was higher than 375%!
Payday loan facility
Wanda bought a certificate of deposit and automatically received a free bike. She purchased a
Promotional CD
Earnings on savings can be measured by the
Rate of return
Ursual has an account that will allow her to waive the minimum balance if she keeps a certain amount in savings. What kind of account does she have?
Regular checking account
When Jack picked up a personal computer form the ______, he really was leasing it.
Rent-to-own center
Zoe signed the back of her check with words "for deposit only." She used a(n)
Restrictive endorsement
The text discusses several types of bonds. Which bond is also called a Patriot Bond?
Series EE
The text discusses several types of bonds. Which bond pays interest for 30 years that is exempt from state and local taxes?
Series EE
The text discusses several types of bonds. Which bond electronically deposits interest into your bank account?
Series HH
The text discusses several types of bonds. Which bond is purchased at face value and has two components to the rate of interest earned - a fixed rate as well as a rate that adjusts twice a year?
Series I
Which of the following is a type of electronic payment?
Smart card
Margaret signed the back of her check with words "pay to the order of Penelope." She used a(n)
Special endorsement
Another name for a regular savings account is a
Statement account
A certificate of deposit that has different interest levels based on market performance is called a
Stock-indexed CD
Xavier bought a certificate of deposit whose interest rate changes. In fact, he might even earn 0% interest on his investment for a time. He purchased a
Stock-indexed CD
If a check is lost or stolen, you should use a
Stop-payment order
Jennifer received a $50 gift card for her favorite retailer. What kind of card did she receive?
Stored-valued card
Which of the following is NOT a financial publication that can provide information about financial services and economic conditions?
The Daily Market
Why are some financial service operations referred to as financial supermarkets?
They offer a combination of services from one source
Anders went to Norway and went shopping. He had to sign his name a second time on this document at the store. Anders used a
Traveler's check
A benefit of investing in a certificate of deposit is the penalty for early withdrawal.
false
A bump-up CD allows an investor to increase the amount invested.
false
A callable CD allows investors to 'cash in' their investment early.
false
A college ID that includes prepaid amounts for meals is called a debit card.
false
A commercial bank is the same thing as a credit union.
false
A savings account is also known as a demand deposit.
false
Due to Check 21, the processing time for checks has increased.
false
Each year, fewer and fewer checks are being written.
false
HH bonds are also known as Patriot Bonds.
false
If a bank allows online transactions, it must also allow face-to-face transactions at the bank.
false
If you get a big-screen television from a rent-to-own center, you will be certain to own it after a period of time.
false
In October 2008, the FDIC announced the temporary Transaction Account Guarantee Program and increased coverage for accounts at insured institutions to $200,000 per depositor.
false
Liquidity and rate of return refer to the same thing.
false
Making transactions using a credit card will immediately reduce your bank balance.
false
Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank's perspective.
false
The 'safety' concern with banks and credit unions refers to the potential loss of money due to investors' bad spending habits.
false
The Truth in Savings Act requires financial institutions to disclose the interest rate on loans.
false
The best option for borrowing money at low rate is to use a payday loan organization.
false
The only question you should ask yourself when selecting a financial service provider is "Where can I get the best return on my savings?"
false
Two years ago, Sean deposited money into a certificate of deposit and received a toaster. The value of the toaster reduced the amount of interest he earned for the first year.
false
A loan from a pawnshop will be more expensive than one from a bank.
true
All money market funds are not covered by federal deposit insurance.
true
As inflation rates increase, the interest rates offered to savers usually increases.
true
I bonds earn interest based on a fixed rate plus inflation.
true
If you think that rates will fall, you should buy a long-term CD to lock your rate now.
true
Lydia found a check that she was given for her birthday 9 months earlier. Her bank should refuse to cash the check.
true
When Flo says she's going to "the bank," she may be implying that she is vising a credit union or stopping at an ATM.
true
When Ted needs cash, his choices include liquidating savings and borrowing.
true
The FDIC temporarily increased its coverage in October 2008 to _______ per depositor.
$250,000
What is the APY for a one-year $8,000 Certificate of Deposit with $1,120 interest?
1.4%
An account that provides a complete financial services program for a single fee is known as
A cash management account
Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe, which of the following should he use?
A savings account
Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?
A trust
Patrick is interest in opening a different account that will allow him to write checks, but he doesn't want to maintain a minimum balance. He should open a(n)
Activity account
In general, which fees have recently decreased for checking accounts?
All of the above have increased. (Overdraft fees, Stop-payment orders, and Check printing)
The Truth in Savings Act requires financial institutions to disclose _____ on savings accounts.
Annual percentage yield (APY)
Nancy invested $10,000 in a certificate of deposit earning 6% per year. Unfortunately, she needed to withdraw it before the maturity date. If the penalty involved two months of interest, what was her total penalty?
$100
Given the information below, what should Jason's adjusted bank balance for his bank reconciliation be? Bank balance: $250 Outstanding checks: $79 Deposit in transit: $25 ATM Fees: $6 Interest earned: $1 Checkbook balance: $201
$196
Neil invested $10,000 in a certificate of deposit earning 12% per year. Unfortunately, he needed to withdraw it before the maturity date. If the penalty involved two months of interest, what was his total penalty?
$200
Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 45 days. What is the most that he liable for?
$238
Evan had three accounts as listed below. In 2009, how much was his total coverage by the FDIC? Bank A: $100,000 Bank B: $75,000 Bank C: $300,000
$425,000
Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?
$50
Gwen had three accounts as listed below. In 2009, how much was a total coverage by the FDIC? Bank A: $275,000 Bank B: $25,000 Bank C: $350,000
$525,000
Victor read the fine print for a checking account he was thinking about using. The find print read "A minimum balance of $500 is required. If your balance falls below this level, you will be assessed a monthly fee of $8." Since Victor was planning to only keep a $100 balance in his account, how much could he be charged each year?
$96.00
What is the APY for a savings account with a $500 balance that receives $24 interest for the year?
4.8%
Opal earned 8% in her savings account. If she is in the 25% tax bracket, what is her after-tax savings rate of return?
6%
All of the following are deposit institutions except
Finance company
Common payment choices for everyday activities include all except
Short-term loan
Nicholas earned 10% in his savings account. If he is in the 25% tax bracket, what is his after-tax savings rate of return?
7.5%
A demand deposit is also known as
A checking account
A time deposit is also known as
A saving account
A legal agreement that provides for the management and control of assets is known as
A trust
When you select a financial service provider, you should ask all of the questions except
All of the questions above should be asked. (Will I be able to borrow money if I need it?, How can I minimize the cost of checking and payment services?, and Where can I get the best return on my savings?)
ATM stands for
Automatic teller machine
Which of the following is correct?
Bank customers typically are provided with online access to view and print checks that have been paid.
If you want to buy U.S. savings bonds, you may purchase them at
Banks, Financial institutions, and Online
Chloe signed the back of her check with nothing else by it. She used a(n)
Blank endorsement
Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?
Budgeting spending
Karen wanted a certificate of deposit that would definitely be available until the maturity date. She would NOT want to consider a
Callable CD
Logan paid a bill with a special form. He received this form at his financial institution and had to pay a fee. He used a
Cashier's check
Nora bought a used car and was told that she needed a check with guaranteed payment. She obtained a
Certified check
Which of the following is NOT correct?
Check 21 increases the fees banks can charge for checking accounts.
Cathy wanted to buy some investments. To which of the following should she go?
Commercial bank
In which of the following are most of the investments insured?
Commercial bank
Which of the following offers checking, savings, lending, and other services?
Commercial bank
When you select a financial service provider, you may find all of the following to be major factors except
Company logo
Earning interest on interest is called
Compounding
Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work?
Credit card company
