Finance Final- Chapter 4

Higher returns on savings will usually result in less liquidity True
A “free” checking account with a minimum balance of $500 has an opportunity cost of lost interest. True
Consumers will usually obtain the best overall value of their dollar by having all financial services with the same institution. False
An asset management account combines several financial services for a single fee True
ATM fees are about the same in different geographic areas. False
Direct deposit usually requires a waiting period for a availability of funds. False
A lost debit card results in potential losses similar to a lost credit card. False
Savers should always attempt to obtain an interest rate that is less than the inflation rate. False
Using a “debit” card is basically the same as writing a check. True
The use of electronic banking adds to the “float” time for financial services customers False
Demand deposits is another term for checking accounts. True
Traditionally, a mutual savings bank offered the widest variety of financial services False
Savings and loan associations offer mortgages True
Credit unions frequently offer lower loan rates than other financial institutions True
The money market fund offered by investment companies is a relatively liquid financial service. True
Consumer finance companies specialize in home mortgages. False
A regular savings account usually offers a higher rate of return to savers than other savings plans. False
A certificate of deposit is usually considered to be very liquid False
The liquidity of a savings account refers to the rate of earning a person will receive. False
The more frequent the compounding, the less a person will earn on a savings account. False
Activity accounts are designed for people who write many checks each month False
A restrictive endorsement will usually include the words “for deposit only.” True
When preparing a bank reconciliation, interest earned on your checking account is added to the bank statement balance. False
The convenience of using a financial institution with 24-hour banking frequently requires a trade-off with personal service
A trust has the purpose of managing the assets of a person.
The storage of funds for future use is the purpose of ____________ services. savings
An all-purpose account that provides several services is a(n asset management account
Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n) five-year certificate of deposit.
The purpose of a debit card is to transfer money electronically.
When interest rates are rising, a person would be best served by short-term savings instruments
Checking accounts are frequently referred to as ____________ deposits. demand
Time deposits consist of savings accounts.
Direct deposit and automatic monthly payments are features of electronic banking
Traditionally, the greatest variety of financial services have been offered by a(n) commercial bank.
To avoid high fees for loans, a person should not borrow from a pawnshop.
The profits from a mutual savings bank go to the depositors.
In recent years, membership in credit unions has continued to increase
An advantage credit unions may have over other financial institutions is low-cost personal loans
The major service offered by investment companies is mutual funds.
____________ specialize in helping people save money in a manner than provides high liquidity. Investment companies
A financial institution organized for the main purpose of providing loans to purchase homes is a mortgage company.
The business hours and location of a financial institution refer to the ____________ factor of selecting a financial institution. convenience
A savings account at a credit union is called a ____________ account. share
A certificate of deposit usually has limited liquidity.
A saver will usually earn the highest rate with which of the following types of savings plans? certificate of deposit
Which of the following savings plans is not covered by federal deposit insurance? a money market fund
An advantage of U.S. savings bonds is interest earned is deferred for federal tax purposes.
The rate of return on a savings account is also referred to as yield.
A $200 savings account that earns $13 interest in a year has a yield of ____________ percent. 6. 5
Savings compounded ____________ would have the highest effective yield. daily
The Truth-in-Savings law requires that financial institutions report annual percentage yield on savings.
Comparison of earnings for different savings plans can best be accomplished using the annual percentage yield.
The Federal Deposit Insurance Corporation provides deposit insurance for commercial banks and savings and loan associations.
A service designed for people who write only a few checks each month is a(n) ____________ account. special or activity
Kevin Friedman only needs to write a couple of checks each month. Which type of checking account would best serve his needs? an activity account
The funds deposited in a checking account can be restricted for use by a holding period.
The purpose of a “special” endorsement is to transfer a check to another person.
A ____________ endorsement would be used if a person is presenting a check in order to obtain cash. blank
The first information to be recorded when writing a check is check stub or check register.
When preparing a bank reconciliation, outstanding checks should be subtracted from the bank statement balance.
In the bank reconciliation process, service fees should be subtracted from the checkbook balance.
Based on the following information, what amount would be SUBTRACTED from the BANK BALANCE side of a checking account reconciliation? Service charge $12, Outstanding checks $145, Interest $3.50, Deposit in transit $80 $145
A personal check with guaranteed payment is called a certified check.

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