Personal Finance Chap 4

If a card issuer uses the same rules as lost or stolen debit cards, what is the maximum amount of liability for lost or stolen credit cards reported within 60 days?

$50

Which of the following actions should you take if you are a victim of identity theft?

-Contact the Social Security administration. -Place a fraud alert on your credit report. -File a police report.

To achieve long-term financial goals, many people trade off ____ for a ____ return.

-Liquidity -Higher

Which of the following are not proper actions to take if you are a victim of identity theft?

-Locate the person who stole your identity. -Leave the area until the problem is resolved. -Ask your friend to help you find the thief.

Place the steps to writing a check in rank order from first to last. This is taken directly from the text.

-Record the date -Write the name of the person receiving the funds -record the amount of the check in figures or numbers -write the amount of the check in words -sign the check -Note the reason for the payment

Common payment choices include:

-credit cards -checks -debit cards -cash

Some tax advantages of EE bonds are that:

-interest is exempt from state and local taxes. -there is no federal income tax until redeemed.

The steps in writing a check include:

-noting the reason for the payment -recording the amount of the check in numerals -writing the name of the person receiving the funds -recording the date -signing the check -writing the amount of the check in words

Benefits of online banking include:

-time savings -e-mail notices for due dates -convenience for transactions

If inflation is 3 percent, a saver would want to earn an interest rate greater than:

3 percent

A $200 savings account that earned $8 after a year would have a rate of return, or yield, of ______ percent.

4

If you are in the 25 percent tax bracket and received an after-tax rate of return of 6 percent, the yield on the savings account would therefore be ______ percent.

8

Bob wrote a check to Linda in the amount of $160. When she deposited the check, she accidentally wrote $180 on her deposit slip (or mobile device) and the bank did not catch the error. The resulting $180 debit in Bob's account went unnoticed by both Bob and Linda. This bank error resulted from:

Bob and Linda's failure to reconcile their checking accounts

____ banks are organized as corporations, with investors contributing the capital for operations.

Commercial

Using savings for paying ____ expenses is one of the mistakes people make when managing current cash needs.

Current

Debit cards allow you to wait to deduct the amounts from your account.

False

Which of the following is not a common fee associated with prepaid debit cards?

Inflation fee

Check-cashing outlets do not offer which of the following services?

Payday loans

Which of the following is not an example of a type of financial service that is focused on payment services? In other words, which of the following does not involve payment of money on your part?

Regular savings account

What is the purpose of liquidity?

To allow you to withdraw money on short notice

What is the main purpose of life insurance?

To provide financial security for dependents.

What is the main function of a mortgage company?

To provide loans to purchase homes

Which of the following is a service not offered by savings and loans?

Trip planning services

A current shortage of cash can be overcome by liquidating savings or borrowing.

True

Redeemed EE bonds may be exempt from federal income tax if the funds are used to pay tuition and fees at a college or qualified technical school for yourself.

True

Another name for an asset management account is:

a cash management account

A deposit ticket is used to add funds to:

an account

Share draft accounts at a credit union:

are interest bearing until a minimum balance is maintained.

EE bonds are exempt from state and local taxes, but federal income tax is typically due:

at redemption

A signature card is the document that helps the bank determine who are the ______ on the account.

authorized persons

A specific stop-payment order given to a bank is designed to:

avoid paying a specific check that is lost or stolen.

A ___ bank is a financial institution that offers a full range of services.

commercial

Overdraft protection is designed to:

cover underfunded checks

A ____ union is a user-owned, nonprofit, financial institution that is organized for the benefit of its members.

credit

A customer has more security in case of fraudulent transactions when a debit card is processed like a(n) _____.

credit card

Financial services include all of the following except:

debt counseling.

A ____ ticket or slip is used to add funds to a checking account.

deposit

Mutual savings banks are owned by ____.

depositors

The biggest advantage of using APY is:

easy to compare rates

A(n) ____ is your signature on the back of the check.

endorsement

When you sign the back of the check, this is a(n):

endorsement

Credit alternatives are only for people of limited resources.

false

A certified check is a personal check with:

guaranteed payment

There is a trade-off between liquidity and:

higher return

A(n) ____ CD has earnings based on the performance of the stock market.

index

Common choices for making payments include all of the following except:

installment loans

annual percentage yield

interest

____ is the attribute of savings accounts that allows you to withdraw money on short notice without a loss of principal or fees. This is taken directly from the text.

liquidity

A ____ savings bank is owned by depositors and specializes in savings and mortgages.

mutual

Saving funds for future use is necessary for financial:

safety

A ____ and loan association traditionally specializes in savings accounts and mortgage loans.

savings

Historically, savings and loans specialized in:

savings accounts and mortgage loans

A ____ draft account is an interest-bearing checking account at a credit union.

share

Financial services will usually not be affected by:

stock prices.

Overdraft protection is an automatic loan made to checking account customers to cover checks written in excess of:

their balance

Asset management accounts are a collection of financial services offered for a single fee.

true

A ____ is a legal agreement that provides for the management and control of assets by one party for the benefit of another.

trust

Redeemed EE bonds can avoid federal taxation if:

used to pay college tuition and fees

If there is a shortage of cash, you will have two basic choices to cope with the situation: ____ from a savings or ____.

Spend Borrow

Which of the following services do savings and loans offer?

-Savings accounts -Mortgages

A regular savings account usually does not have:

- a high rate of interest - overdraft protection - a high balance requirement

Credit alternatives to be used for borrowing if an individual needs more cash than is available include:

-credit card cash advances. -personal loans.

____ deposits include checking accounts and other payment methods.

Demand

What is not typically a basic concern of a financial services customer?

Does the bank offer tax preparation services?

What type of financial institution typically does not have federal deposit insurance?

Investment companies

A major concern with prepaid debit cards is which of the following?

The high fees often charged

Which of the following is not required to be disclosed by the Truth and Savings Act?

The inflation rate

A debit or cash card is a plastic access card that activates ATM transactions and may also be used to make purchases.

True

Which of the following is true regarding credit cards versus debit cards?

With credit cards, you are borrowing money but you are spending your own money with debit cards.

A regular savings account usually offers:

a low or no minimum balance requirement

Deposit institutions would not include a:

brokerage firm.

An automatic teller machine (ATM) is also called as a(n) " ____ machine."

cash

A savings plan that requires a certain amount of money to be left for a specified amount of time is a:

certificate of deposit

A ____ bank is a financial institution that offers a full range of services.

commercial

____ is a process that calculates interest based on previously earned interest.

compound

Your maximum liability for a lost or stolen debit card is $500 if the card issuer uses the same rules that apply to lost or stolen credit cards.

false

Money market accounts are insured by federal deposit insurance, whereas money market mutual ____ are not.

funds

All of the following are deposit institutions that serve as financial intermediaries except:

insurance companies.

Compounding is the process that calculates earnings based on previously earned:

interest

The rate of ____ is the percentage increase in the value of savings as a result of interest earned.

interest

A ______ fund is an account used for savings offered by investment companies.

money market

A money market fund is a:

savings instrument

The rate of return is:

the percentage increase in the value of an account

Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $200 and earns 6 percent interest per year?

$12.72

Using compounding, how much interest will be earned in the second year of a savings account that has an original balance of $100 and earns 5 percent interest per year?

$5.25

A Savings Bond that has an interest rate based on two components is a(n):

I bond

One criterion for choosing a saving plan is the rate of return.

True

Another name for an automated teller machine (ATM) is:

a cash machine

A savings plan that requires a certain amount of money to be left for a specified amount of time is a

certificate of deposit

Which services do finance companies typically not offer?

-Savings accounts with high interest rates -Checking accounts with unlimited withdrawals -Frequent access to cash machines

A certificate of ____ is a savings plan requiring that a certain amount be left on deposit for a stated time period.

deposit

With the APY method, it is ______ to compare rates.

easy

A failure to reconcile your bank account each month can result in not knowing which of the following?

If your bank is overcharging you for fees.

A stop-payment order is designed to:

avoid payment of a specific check

A ____ check is a personal check with guaranteed payment.

certified

A ____ card is the document that records the official signatures of the person or persons authorized to write checks on the account.

signature

Which services do mortgage companies typically not offer?

-Checking accounts with unlimited withdrawals -Frequent access to cash machines -Savings accounts with high interest rates

A $500 savings account that earned $25 after a year would have a rate of return, or yield, of ______ percent.

5

You are in the 25 percent tax bracket. So, the yield on the savings account is 8 percent, and the after-tax savings rate of return is ______ percent.

6

Indexed CDs have rates that vary with the:

stock market

What types of financial institutions have federal deposit insurance?

-Commercial banks -Credit unions -Savings and loans

Which of the following deposit-type institutions serve as financial intermediaries?

-Credit unions -Commercial banks -Savings and loans

Some of the basic concerns of a financial services customer when comparing financial services include which of the following?

-Where can I get the best return on savings? -How can I minimize costs for checking and savings? -Will I be able to borrow money when I need it?

Selection of a savings plan is influenced by:

-restrictions and fees. -liquidity. -rate of return. -safety.

With the APY method, it is ______ to compare rates

easy

A credit union is owned by:

the members

Debit cards are different from credit cards because:

you are spending your own money when you use a debit card

Which of the following are considered demand deposits?

-checking account -Payment accounts

Time deposits do not include:

-credit card and cash loans. -checking accounts.

The two parts of interest on an I bond are a(n):

-fixed rate of interest for the life of the bond. -inflation rate that changes semiannually.

Benefits of U.S. savings bonds include:

-government guarantee -low minimum deposit -exemption from state and local taxes

Life insurance has other uses, including:

-investment options -Savings alternatives -Providing for dependents

Concerns of online banking include:

-overspending due to ease of access. -online scams. -security violations.

Common mistakes made when managing current cash needs include:

-overspending. -using savings for current expenses. -leaving funds in low-interest accounts too long. -lacking sufficient liquid assets to pay current bills.

A trust is a legal agreement that:

-provides control of assets. -enables management of assets. -is created by one party for benefit of another.

The Truth in Savings Act requires the following items to be disclosed:

-the annual percentage yield (APY). -other terms and conditions of the savings plan. -the interest rate. -fees on deposit accounts.

Check-cashing outlets offer the following services

-utility bill payments. -money orders. -electronic tax filing.

Fraud charges should be reported within how many days of receiving your statement to protect your right not to be charged for the transaction?

60

Which type of financial institution typically charges higher rates?

Check-cashing outlets

This type of card is a plastic access card used in computerized banking transactions.

Debit card

Financial services can change due to such factors as changing interest rates and rising consumer prices.

True

The ____ percentage yield is the rate expressing the total amount of interest that would be received on a $100 deposit based on the annual rate and frequency of compounding for a 365-day period.

annual

Money market accounts at commercial banks are insured by ______, whereas money market funds are not.

federal deposit insurance

A drawback of U.S. savings bonds is:

lower rates for early redemption.

What is the main function of a finance company?

make loans to consumers and small businesses

The Blank______ is the percentage rate expressing the total amount of interest that would be received based upon time and compounding.

annual percentage yield

When comparing savings accounts rates of return, you should choose one that:

beats the rate of inflation