Quiz 5: Financial Services: Savings Plans and Payment Accounts

A "no-fee" checking account that requires a non-interest-earning minimum balance of $500 has an opportunity cost of lost interest earnings.

An asset management account provides a complete financial services program for a single fee.

Using a debit card to make purchases means you are spending your own funds.

Demand deposits are another term for checking accounts.

A regular savings account usually offers a higher rate of return to savers than a certificate of deposit.

A certificate of deposit is also known as a demand deposit.

The more frequently the compounding occurs,the less a person will earn on a savings account.

A restrictive endorsement on a check to be deposited consists of the words "for deposit only."

When preparing a bank reconciliation,interest earned on your checking account is added to the bank statement balance.

The most frequent users of payday loans are workers who have become trapped by debts or poor financial decisions.

A trust has the purpose of: A)solving a person's financial problems. B)obtaining low-interest loans. C)handling daily money management activities. D)managing the assets of a person. E)improving a person's budgeting skills.

The storage of funds for future use is a purpose of ________,which include savings accounts and certificates of deposit. A)trust B)borrowing C)credit card D)time deposits E)cash checking

An all-purpose account offered by investment brokers that provides a complete financial services program is a(n): A)NOW account. B)asset management account. C)EFT account. D)mutual fund. E)money market account.

Joan Martin expects interest rates to decline over the next few months.To achieve her long-term financial goals,she will trade off liquidity for a higher return by using a: A)regular savings account. B)interest-bearing checking account. C)five-year certificate of deposit. D)money market account. E)money market fund.

A debit card transaction is processed by a retailer,with the amount of purchases deducted from your checking account by: A)transferring money electronically. B)obtaining a discount on consumer purchases. C)making credit card purchases. D)quickly obtaining a cash loan. E)making investments with an investment company.

When interest rates are rising,a person should select: A)short-term savings instruments. B)long-term savings instruments. C)short-term loans. D)variable-rate loans. E)five-year certificates of deposit.

Checking accounts are frequently referred to as ________ deposits. A)common B)time C)current D)loan E)demand

Time deposits are another name for: A)checking accounts. B)loans and charge accounts. C)savings accounts. D)government securities. E)profits earned by a financial institution.

Which of the following statements regarding debit and credit card liability is correct? A)A credit card carries more risk of loss to the cardholder. B)A debit card carries more risk of loss to the cardholder. C)There is no cardholder liability if either type of card is lost. D)The Federal Government insures losses on credit but not debit cards. E)The Federal Government insures losses on debit but not credit cards.

Which of the following is organized as a corporation and owned by stockholders? A)Credit unions B)Investment companies C)Mutual savings banks D)Savings and loan associations E)Commercial banks

To avoid high fees for cash loans,a person should avoid borrowing from a: A)credit union. B)savings and loan association. C)pawnshop. D)commercial bank. E)mutual savings bank.

The profits from a mutual savings bank go to the: A)creditors. B)loan applicants. C)stockholders. D)depositors. E)community in which it operates.

In recent years,membership in credit unions has: A)become more difficult due to higher taxes. B)become more flexible. C)been limited to government employees. D)declined due to poor credit union management. E)stayed at about the same level.

An advantage credit unions may have over other financial institutions is: A)interest-bearing checking accounts. B)lower loan rates. C)flexible-rate loans. D)credit cards. E)variable-rate savings plans.

A common service offered by investment companies is: A)interest-bearing checking accounts. B)variable-rate loans. C)credit card accounts. D)savings bonds. E)money market funds.

The business hours and ATM locations of a financial institution refer to the ________ feature when selecting a financial institution. A)safety B)cost C)compounding D)liquidity E)convenience

A regular savings account at a credit union is called a ________ account. A)share B)NOW C)club D)certificate E)money market

A certificate of deposit usually has: A)earnings based on fluctuating market interest rates. B)no set time period. C)a penalty for early withdrawal of funds. D)a variable rate of return. E)no minimum deposit amount.

A saver will usually receive higher earnings with which one of the following types of savings plans? A)Certificate of deposit B)Debit account C)Regular savings account D)Share account E)Credit account

Which one of the following savings plans is not covered by federal deposit insurance? A)Account at a savings and loan B)Regular checking account at a commercial bank C)Money market account at a commercial bank D)Money market fund with an investment company E)Certificate of deposit at a commercial bank

Which is a true of investing in Series EE U.S.Savings Bonds? A)The interest earned is always exempt from federal income taxes. B)Federal income tax on earnings may be deferred until the bonds are redeemed. C)The interest rate on these bonds is adjusted twice a year for inflation. D)Series EE Bonds must be purchased for set amounts over $100. E)They can be redeemed any time without forfeiting interest.

The rate of return on a savings account is also referred to as: A)liquidity. B)compounding. C)yield. D)opportunity cost. E)asset turnover.

A $200 savings account that earns $8.50 interest in a year has a yield of ________ percent. A)2)35 B)13.00 C)8)50 D)11.25 E)4)25

Savings compounded ________ would have the highest effective yield. A)daily B)annually C)semiannually D)monthly E)weekly

The Truth in Savings law requires that financial institutions: A)provide insurance for savings accounts. B)send customers monthly bank statements. C)disclose annual percentage yield on savings accounts. D)offer adjustable rate savings accounts. E)become members of the Federal Reserve System.

Comparison of earnings for different savings plans can best be accomplished using the: A)discounted present value. B)compounding frequencies. C)net present value. D)annual percentage yield. E)after-tax rate of return.

The Federal Deposit Insurance Corporation insures savings plans at: A)credit unions and mutual savings banks. B)commercial banks and savings and loan associations. C)investment companies and finance companies. D)insurance companies and credit unions. E)commercial banks and credit unions.

Savers should do which of the following in times of falling interest rates? A)Use long-term loans to take advantage of current low rates. B)Use short-term loans to take advantage of lower rates when you refinance the loans. C)Select short-term savings instruments to take advantage of higher rates when they mature. D)Select short-term savings instruments to lock-in earnings at current high rates. E)Select long-term savings instruments to lock-in earnings at current low rates.

A limit on the amount you must keep on deposit in a checking account in order to earn interest or avoid a service charge is an example of a: A)holding period. B)restriction. C)overdraft fee. D)share draft. E)certified deposit fee.

The purpose of a "special endorsement" is to: A)cash a check. B)deposit a check. C)transfer a check to another person. D)withdraw cash from your account. E)reduce the charge for service fees.

A ________ endorsement would be used if a person is presenting a check in person to obtain cash. A)restrictive B)common C)special D)blank E)documented

A ________ endorsement consists of the words "for deposit only" followed by your signature and account number and is especially useful when you are depositing checks. A)blank B)restrictive C)common D)special E)documented

When preparing a bank reconciliation,outstanding checks should be: A)added to the bank statement balance. B)subtracted from the bank statement balance. C)added to the checkbook balance. D)subtracted from the checkbook balance. E)ignored until they have cleared.

In the bank reconciliation process,ATM withdrawals should be: A)added to the bank statement balance. B)subtracted from the bank statement balance. C)added to the checkbook balance. D)subtracted from the checkbook balance. E)ignored.

Based on the following information,what amount would be subtracted from the bank statement side of the bank reconciliation? ATM withdrawal $20; Outstanding checks $154; Interest $1.25; Deposit in transit $75. A)$154.00 B)$20.00 C)$174.00 D)$155.25 E)$75.00

A personal check with guaranteed payment is called a: A)traveler's check. B)bank draft. C)certified check. D)money order. E)cashier's check.

Nick Martin writes a check to pay for day care for his son.What type of financial service is Nick using? A)Payment service B)Savings service C)Credit service D)Trust service E)Investment service

Nate Rogers deposited $2,500 in a 3-year bank certificate of deposit which pays six percent interest.What type of financial service is Nate using? A)Payment service B)Savings service C)Credit service D)Trust service E)Budget counseling

David Wynn gets an auto loan from his credit union for $11,500.David will make monthly payments over the next five years to repay the loan.What type of financial service is David using? A)Payment service B)Savings service C)Credit service D)Trust service E)Asset management

Tim Gleason has set up a legal agreement that allows the First State Bank of Orlando to manage funds set aside for his daughter's college education.What type of financial service is Tim using? A)Payment service B)Savings service C)Credit service D)Trust service E)Asset management

What is the rate that banks charge large corporations for loans called? A)Prime rate B)Discount rate C)Mortgage rate D)Treasury bond rate E)Corporate bond rate

What is the rate that the Federal Reserve banks charge financial institutions for loans called? A)Prime rate B)Discount rate C)Mortgage rate D)Treasury bond rate E)Corporate bond rate

What is the rate an individual will pay to borrow for the purchase of a new home called? A)Prime rate B)Discount rate C)Mortgage rate D)Treasury bond rate E)Corporate bond rate

What is the term used to refer to the yield on a long-term (20-year)debt obligation issued by the U.S.government? A)Prime rate B)Discount rate C)Mortgage rate D)Treasury bond rate E)Corporate bond rate

Which of the following is a user-owned,nonprofit,cooperative financial institution? A)Life insurance company B)Investment company C)Mortgage company D)Pawnshop E)Credit union

Which of the following has the main purpose of issuing a policy that provides financial security for dependents? A)Life insurance company B)Commercial bank C)Savings and loan association D)Credit union E)Mutual savings bank

Which of the following institutions is organized primarily to provide loans to purchase homes? A)Life insurance company B)Finance company C)Mortgage company D)Pawnshop E)Investment company

Which of the following institutions makes loans based on the value of tangible possessions,such as jewelry and other valuables? A)Life insurance company B)Finance company C)Mortgage company D)Pawnshop E)Investment company

Which of the following is a drawback of a money market fund from an investment company? A)Penalty if money is withdrawn early B)Lower rate of interest if redeemed within the first five years C)Lacks liquidity D)Not covered by FDIC insurance E)Not usually allowed to write checks

Which CD attempts to attract savers with gifts or special rates? A)Bump-up B)Indexed C)Callable D)Global E)Promotional

Which is a CD that offers a higher rate at set intervals,such as every six months you are invested? A)Bump-up B)Indexed C)Callable D)Global E)Promotional

Which CD pays earnings based on the stock market? A)Bump-up B)Indexed C)Callable D)Global E)Promotional

Which CD starts with a higher rate,has a long time to maturity,and can be closed by the bank after a set time period? A)Bump-up B)Indexed C)Callable D)Global E)Promotional

Automatically buying a new CD upon maturity of the current CD is commonly referred to as: A)creating a CD portfolio. B)rolling over. C)refinancing. D)calling a CD. E)bumping up.

Which law requires financial institutions to disclose fees,the interest rate,the annual percentage yield,and the other terms and conditions on savings account plans? A)Truth in Savings Law B)Truth in Lending Law C)Expedited Funds Availability Act D)Equal Employment Opportunity Act E)Identity Theft Protection Act

Which type of organization does not provide home mortgages? A)Federal credit unions B)Savings and loan associations C)Employee credit unions D)Mutual savings banks E)Check-cashing outlets

What type of account would you expect to provide the poorest yield? A)Certificate of deposit earning 4% compounded semiannually B)Savings account earning 4% compounded annually C)Money market account earning 4% compounded monthly D)Money market fund earning 4% compounded monthly E)Savings account earning 4% compounded semiannually

What type of account would be considered the most liquid? A)3-year certificate of deposit B)Regular savings account C)Money market account D)U)S.savings bond E)Share of stock

Interest rates charged by a pawnshop: A)can range from 3% per month to over 100% a year. B)are usually below 5% per year. C)are normally lower than a bank. D)can range from 100% per month to over 300% a year. E)are insignificant.

A person borrows $100 from a payday loan company,and pays $10 interest for two weeks.This would result in an annual interest rate of approximately ________ percent.Ignore compounding. A)110 B)260 C)10 D)20 E)5

A savings account earns 3 percent.If the saver is in a 22 percent tax bracket,the after-tax savings rate of return would be ________ percent. A)22.00 B)19.00 C)3)00 D)2)34 E)0)66

The Federal Deposit Insurance Corporation insures deposits up to $250,000 per person per financial institution.Suzanne has $520,000 in a joint account with her husband,Ted.How much is not covered by FDIC insurance? A)$20,000 B)$260,000 C)$520,000 D)$250,000 E)$0

Sue deposited $1,000 in an account paying 2 percent interest.The inflation rate is 5 percent.What is the buying power of the account after one year? A)$1,050 B)$1,020 C)$1,000 D)$970 E)$950

Your bank statement shows a balance of $695.Your checkbook register shows a balance of $562.You earned interest of $3 and had a service charge of $5.There are no outstanding deposits.What is the amount of outstanding checks? A)$135 B)$160 C)$133 D)$6 E)$0

Which of the following types of financial institutions are insured by federal government agencies? A)Credit card companies and finance companies B)Credit unions and investment firms C)Mortgage companies,banks,and credit unions D)Banks,credit unions,and savings and loans associations E)Banks,credit card companies,and credit unions

Which of the following represent the use of credit? A)Demand deposits B)Home mortgage C)ATM withdrawals D)Time deposits E)Debit card

Which of the following is a way to reduce ATM fees? A)Withdraw larger amounts rather than making several smaller withdrawals. B)Withdraw the minimum amount each time you withdraw. C)Withdraw from ATMs closest to you regardless of which bank owns the ATM. D)Withdraw from ATMs that can be used by customers from many different banks. E)Make a separate withdrawal for each purchase to maintain a record of your spending.

Series EE U.S.Savings Bonds can be purchased: A)in increments of $25 only. B)for any amount above $25. C)for less than face value. D)in increments of $50 only. E)in whole dollar amounts only.

Determine the rate of return on a savings account in which you deposited $200.00 and earned $5.00 in interest after one year. A)5)00% B)0)05% C)2)50% D)0)20% E)18.00%

What is the term used to refer to the cost of borrowing for large U.S.corporations? A)Prime rate B)Discount rate C)Corporate bond rate D)Treasury bond rate E)T-bill rate

An estimated ________ people in the U.S.are "unbanked," using a variety of alternative services rather than having a bank account. A)1 million B)6 million C)8 million D)10 million E)25 million

Which one of the following financial service providers should be avoided,because the interest rates charged on loans can be over 100% a year? A)Pawnshop B)Credit union C)Savings and loan association D)Mutual savings bank E)Life insurance company

Series EE bonds continue to earn interest for how many years? A)10 B)20 C)25 D)30 E)35

A higher rate of return would result from a savings account that had which of the following compounding frequencies? A)Daily B)Weekly C)Biweekly D)Monthly E)Yearly

An asset management account typically offers the following service: A)online banking. B)checking account. C)a line of credit. D)mobile apps. E)All of these

This type of financial institution is known to frequently offer lower fees and lower loan rates: A)Commercial bank B)Savings and loans association C)Mutual savings bank D)Credit union E)Investment companies

This type of savings plan is usually considered to be very liquid: A)Bonds B)Stocks C)Certificate of deposit D)Regular savings account E)Investment account

Demand deposits are another term for: A)savings accounts. B)savings bonds. C)checking accounts. D)certificates of deposit. E)investment accounts.

Which one of the following is not true for PayNearMe transactions? A)It is used by people without a credit or debit card. B)It is used for online transactions. C)It allows buyers to make a purchase and then pay cash at a local store. D)The customer does not receive a receipt. E)The seller is notified of the payment.

Prepaid debit cards are used for: A)Social Security benefits. B)school lunches. C)highway tolls. D)telephone service. E)All of these

Which one of the following is true for an interest-earning account? A)It usually requires a minimum balance. B)It is an account that charges a fee for each check written. C)It does not earn interest. D)It does not require a minimum balance. E)None of these are true.

Which one of the following will help to avoid identity theft? A)Put your Social Security number on checks. B)Put your full name on checks. C)Put your full account number on checks when paying a bill. D)Use passwords involving both letters,special characters,and numbers. E)Check your credit report once every three years.

The Check Clearing for the 21st Century Act (known as Check 21)shortens the processing time for deposited checks by: A)verifying the identity of the depositor. B)establishing the substitute check. C)verifying the identity of the financial institution. D)eliminating paper checks. E)making the funds immediately available upon deposit.

"Loading" of prepaid debit cards may occur by: A)cash or check. B)direct deposit. C)online transfer. D)smartphone check photo E)All of these

Which one of the following will help to avoid identity theft? A)Download apps from any app store. B)Avoid sharing personal data on social media. C)Use public Wi-Fi networks. D)Avoid anti-spam software. E)Mail bill payments from home mailbox.

One way to reduce payday loans is the use of Instant Financial's app that allows employees access to: A)100% of their pay on payday. B)50% of their pay each month they work. C)50% of their pay each week they work. D)50% of their pay each day they work. E)100% of their pay each day they work.

Which of the following is not a "High-Cost Financial Service Provider"? A)Pawnshops B)P2P lending intermediaries C)Payday loan companies D)Rent-to-own centers E)Car title loan companies

What are the main types of deposit institutions and nondeposit institutions used by consumers?

Evan Nolan is a college graduate who has just landed a great job.He feels it is time for him to start saving a portion of his earnings.What factors would you recommend he consider when evaluating and comparing different savings plans?

Brad Kellogg maintains a monthly balance in his checking account of approximately $150,writes about 25 checks a month,and makes three deposits each month.How would Brad decide which one of the following checking accounts he should use? Bank A: regular checking account with a monthly fee of $4.50 for an unlimited number of checks,no monthly balance requirement,and no interest earnings. Bank B: interest-bearing checking account paying 4 percent interest on balances over $300 and a monthly service charge of $6 if the balance falls below $300. Bank C: special checking account that charges 35 cents a check and 20 cents for each deposit,no interest earnings. Bank D: minimum-balance account that requires a $200 minimum balance to avoid the $10 monthly fee,two percent interest paid if the balance remains above $400.

You are planning to purchase a house in five years and intend to save a fixed amount of money each month for a down payment.What are three important considerations in selecting a savings plan?

Josh earned $84 on $1,200 invested in a high yield money market account.He is taxed at 22% of his earnings.What is the after-tax yield on his investment?

Describe mobile transfer apps and how they work.