Chapter 5- Business

You should update your check register monthly when you receive the bank statement.

False

Congress has assigned responsibility for implementing many of the laws that protect consumers in credit and financial transactions to the

Federal Reserve System

Describe the correct procedure for writing a check.

First, you have to date the check in the top right hand corner. Then, specify who the check is for and write the name or business on the "Pay to the Order of" line. Next, you have to write the payment amount in numbers and words. Finally, sign the check (and write a memo if needed).

__________________interest is earned on both principal and previously earned interest.

compound

When reconciling a bank statement, the amount of outstanding checks is

deducted from the bank statement balance

Which of the following would not be an adjustment to the check register balance on a bank reconciliation?

deposits in transit

____________________is the act of signing another person's name on a check.

forgery

Checks written that have not yet been processed by the bank are called _________________________checks.

outstanding

Greg deposits $500 into an account paying 7 percent simple interest annually. How much interest will he earn after 6 months?

$17.50

Lynn has an account that earns interest at an annual rate of 5 percent. Interest is compounded quarterly. Lynn's account balance is $4,000. What is the balance in her account at the end of the year?

$4,203.79

Your bank statement balance is $1,000. You have outstanding checks of $100. You have deposits in transit of $500. You have service fees of $15. You earned interest on the account in the amount of $2. What should be your adjusted bank balance?

1,400

Your check register balance is $1,413. You have outstanding checks of $100. You have deposits in transit of $500. You have service fees of $15. You earned interest on the account in the amount of $2. What should be your adjusted check register balance?

1,400

Using the Rule of 72, how many years will it take to double $5,000 earning 4 percent interest?

18

Explain how a cashier's check works. Why do some people and businesses prefer to receive a cashier's check?

A cashier's check is a check issued against bank funds. When you buy a cashier's check, the money comes from your account to pay the bank.Some people prefer to receive a cashier's check or certified check rather than a personal check because they are more secure.

What is a money order and why is it used?

A money order is a type of check for a specified amount used to pay bills or make payments for which the money is guaranteed. The money order is a safe way to send money through the mail.

Paying bills online is fast and convenient but much riskier than sending checks through the mail.

False

A CD is a great savings option if you want to have immediate access to the money.

False

Banks will hold postdated checks and process them at the future date.

False

Debit cards carry all the same protections provided with credit cards.

False

Forgery occurs when someone alters a check by changing its amount to obtain more money from another person's account.

False

Online-only banks are subject to the same laws and regulations as traditional banks, but online-only bank accounts are not insured by the FDIC.

False

Overdraft protection for checking accounts is automatically provided at no cost by most U.S. banks.

False

Which of the following is not a demand deposit in a bank?

certificate of deposit

What should you do if you make an error while writing a check?

If you make an error while writing a check, you should void the check.

Many banks allow their account holders to access and manage their accounts on the Internet. List some banking activities that can be done online. Discuss advantages of Internet banking.

Some bank activities that can be done online include checking account balances, transfer money, and pay bills. One advantage to internet banking is that it is safer because nothing can get lost in the mail. Also, you can see how much is in your account at any given time.

List the items found on a typical bank reconciliation. If applicable, indicate if the item should be added or subtracted.

Some items listed on the bank reconciliation include deposits, credits, checks, withdrawals, charges, and interest. Deposits, credits, and interest will all be added while checks, withdrawals, and charges will be subtracted.

What three duties are carried out by the Fed with respect to consumer rights in credit and financial transactions?

The three duties carried out by the Fed include educating consumers about consumer protection laws, enforcing consumer protection laws, and managing a consumer complaint program.

What are the three responsibilities of having a bank account?

Three responsibilities of having a bank account include maintaining your balance, monitoring your account, and knowing you rights.

Explain how you can avoid the following costs of banking: monthly account fees, NSF fees, ATM fees, and inactive account fees.

To avoid monthly account fees you can either meet the minimum balance requirement or have a special free account. To avoid NSF fees you can get overdraft protection so the bank won't "bounce" your check. To avoid ATM fees you can use your own bank's ATM or get special/multiple accounts. Lastly, to avoid inactive account fees you have to use your account regularly.

A(n) __________________________is a tool used to track checking account transactions and keep a running balance of your account.

check register

What is meant by floating a check? What is the risk involved?

To float a check means to write a check and planning to make a deposit later to cover the check before it is processed. This is a risk because the check could get cashed before there are funds in the account.

"Divisibility" refers to the fact that money is divided into denominations for ease in compl​eting transactions.

True

A checking account is also called a demand deposit account because the account holder may withdraw money on demand or write checks on the account at any time.

True

A special endorsement creates a third-party check.

True

Banks may charge fees for checking and savings accounts that do not meet minimum usage requirements.

True

By insuring deposits in banks, the FDIC helps to promote public confidence in the U.S. financial system.

True

If a U.S. savings bond is redeemed two years after purchase, a three-month interest penalty will be applied.

True

If a smart card is stolen, the thief cannot access your bank account.

True

When reconciling a bank statement, the amount of deposits in transit is

added to the bank statement balance

When you set aside a fixed amount of savings on a regular basis over time, it is called

an annuity

A_________________ endorsement consists only of the payee's signature.

blank

A check marked "NSF" and returned to the payee's bank unpaid is said to have ________________.

bounced

When a bank officer tries to gain an understanding of your needs in order to offer the best mix of services to fulfill those needs at the least cost to you, the bank officer is practicing________________________ .

relationship banking

The words "For deposit only" written above the signature of the payee represents a ____________________endorsement.

restrictive

Many people rent a(n)_____________________________ , which is a secure container located in a bank vault, to store important documents and valuable jewelry.

safe deposit box

Which of the following is the most liquid?

savings account

The words "Pay to the order of" are included in which type of endorsement?

special endorsement

An IRA can be set up through all of the following except

the TreasuryDirect website

A(n) ________________________check is issued by the check writer to the payee, who then endorses and transfers it to another party.

third-party

When a paper check is transformed into a digital image, it is said to be

truncated