Finance CH. 4 Quiz Questions

John Anderson deposited $10,000 in a certificate of deposit (CD) for 3 years at 5%. At maturity, it will be worth?a. $11,580b. $10,725c. $10,500d. $11,400e. $12,400 a. $11,580
A check you wrote to buy shoes last week has not yet been approved by the bank. It is said to be:a. Creditedb. Certifiedc. Outstandingd. Subtractede. Endorsed c. Outstanding
Funds in commercial banks are protected by the:a. National Credit Union Administration (NCUA)b. Federal Deposit Insurance Corporation (FDIC)c. Savings Association Insurance Fund (SAIF)d. National Credit Union Share Insurance Fund (NCUSIF)e. Federal Depositors Assurance Corporation (FDAC) b. Federal Deposit Insurance Corporation (FDIC)
Funds invested in a _______ should not be withdrawn for a stated period in order to avoid an interest penalty.a. Checking Accountb. Certificate of depositc. Savings accountd. Negotiable order of withdrawal (NOW) accounte. U.S. Treasury bill b. Certificate of deposit
Low interest rates that have persisted since the financial crisis of 2008-2009 have been beneficial to:a. Banksb. Retireesc. Saversd. Studentse. Share investors a. Banks
Cash and near-cash resources are known asa. Liquid assetsb. Non-cash assetsc. Non-current assetsd. Fixed assetse. Long-lived assets a. Liquid assets
Harry received a scholarship of $2,000. He plans to invest this money for five years at 8%, compounded annually. If he accomplishes this, Harry will have an ending balance ofa. $2,160b. $3,162c. $2,520d. $2,938e. $2,608 d. $2,938
Which of the following is true of asset management accounts?a. Borrowing and investing facility unavailable to accountholdersb. Sweeping of excess balances into money market deposit account (MMMF)c. Limited free checking of available balanced. Deposits are protected by the Securities investor Protection Corporation (SIPC)e. Fixed annual fees and account charges on deposit account d. Deposits are protected by the Securities investor Protection Corporation (SIPC)
Interest earned for a period should be added to the ending balance shown in your checkbook while reconciling your accountTrueFalse True
Low interest rates create economic distortions, especially when real, inflation-adjusted interest rates are positiveTrueFalse False
You have $900 in your checking account when your ATM card and PIN are stolen. You could lose up to ______ if you notify your bank about the lost ATM card after 60 business days after your periodic statement is maileda. $450b. $900c. $0d. $500e. $50 b. $900
Alice lost her ATM card and reported it missing the next day. She found that $800 had been withdrawn from her savings account. Alice’s loss is equal to:a. $800b. $0c. $25d. $500e. $50 e. $50
Mary has calculated her adjusted balance as $500. She notices that her bank’s service charges are $20 for this period. Mary’s ending balance in her bank account is ______a. $500b. $510c. $480d. $520e. $600 c. $480
Negotiable order of withdraw (NOW) accounts manager and administer the investments in a trust account or from an estate. TrueFalse False
Mike has $450 in his checking account when his ATM card and pin are stolen. If Mike notifies his bank within two business days after he discovers the card missing, his loss is limited to ________a. $50b. $500c. $400d. $0e. $25 a. $50
Kate tends to issue checks quite often without having sufficient balance in her account. She should look for an account with a/an ____________ facility. Overdraft protection
A check you issued last week has been stolen. You can prevent the amount on the check from being withdrawn from your account by an unauthorized person by:a. Depositing the correct amount of moneyb. Properly endorsing the checkc. Requesting a stop paymentd. Tearing up the clocke. Writing a new check c. Requesting a stop payment
Laura has a $100,000 balance in her checking account at Best Bank, and she has purchased a certificate of deposit (CD) worth $50,000 issued by Best Bank. Laura is also thinking of investing $200,000 either in Best Bank or in Trust Bank. Which of the following is a suitable strategy for Laura if she wants her deposits to be completely insured? Laura should invest $100,000 in a money market deposit account (MMDA) of Best Bank and invest $100,000 in an asset management account of Trust Bank.
Compound interest means that a savings account earns interest on the interest perviously earned. TrueFalse True
You have $450 in your checking account when our ATM card and PIN are stolen. You could lose up to ______ if you notify your bank about the lost ATM card within 2-8 business daysa. $25b. $450c. $50d. $500 b. $450
Which of the following are protected by the Federal Deposit Insurance Corporation (FDIC) a. Stocks and Bondsb. Money Market deposit accountsc. Life insurance policiesd. Money market mutual fundse. Asset management accounts b. Money Market deposit accounts
Which of the following is an interest-bearing checking account?a. Negotiable order of withdrawal (NOW) accountb. Regular checking accountc. Treasury billd. Certificate of deposit a. Negotiable order of withdrawal (NOW) account
The minimum denomination of T-bills is: a. $500b. $2,000c. $100d. $2,500e. $1,000 c. $100
Which of the following is a non-depositary financial institution?a. Credit Unionb. Commercial bankc. Securities firmd. Savings institution c. Securities firm
The FDIC guarantees deposits up to _______ per depositor per banka. $100,000b. $250,000c. $300,000d. Unlimited b. $250,000
An instrument that is issued by a depository institution and specifies a minimum investment, and interest rate, and a maturity is called what?a. Bondb. Share of stockc. Money orderd. Travelers checke. Certificate of deposit e. Certificate of deposit
The greater the risk the greater the rewardTrueFalse True
When the federal Reserve Bank wishes to reduce interest rates, it does what?a. Sells treasury securitiesb. Buys treasury securitiesc. Increases bank feesd. Established a lower interest rate cap b. Buys treasury securities
1. Maximum Employment2. Stable Prices3. Moderate long-term interest rates The 3 objectives controlled by the Federal Reserve
A NOW account:a. Pays interest but usually requires a minimum balanceb. Pays no interestC. Pays interest has limits check writing privileges a. Pays interest but usually requires a minimum balance
Treasury Bill typicallya. Have no maturity dateb. Pay less interest then a savings accountc. Are purchased at a discount from par (face) valued. Are issued by most depository institutions c. Are purchased at a discount from par (face) value
Series EE Bonds:a. Are the same as the older “I” Savings Bondsb. Permit holders partial or complete tax avoidance when used for education expensesc. Are sold in denominations of $10d. Have been discounted b. Permit holders partial or complete tax avoidance when used for education expenses
Higher interest rates on certificates of deposit are associated with:a. smaller deposits.b. higher nominal rates.c. shorter yield curves.d. longer maturities.e. lower effective rates. d. longer maturities.
When doing an account reconciliation, interest earned on your account should be:a. deducted from your checkbook ledger.b. listed as outstanding.c. compared to your interest calculations.d. added to your checkbook ledger.e. ignored because the bank has already recorded it. d. added to your checkbook ledger.
Which of the following is true of low interest rates?a. They encourage individuals to save more.b. They encourage paying down the national debt.c. They encourage investors to search for stocks paying high dividends.d. They encourage investors to search for investments like Treasury bills.e. They encourage the substitution of equity by debt. c. They encourage investors to search for stocks paying high dividends.
Nondepository institutions are referred to as banks. false true False
______________ is the routine, day-to-day administration of liquid assets by an individual or family.a. Depository management b. Resource management c. Cash management d. Financial management c. Cash management
The financial crisis of 2008-2009 followed by low interest rates have been beneficial to ___________?a. borrowers b. investors c. retirees d. shareholders a. borrowers
The _____ department of a bank provides investment and estate planning advice.a. electronic fund transferb. trust servicesc. debit cardd. safe-deposit boxese. NOW account b. trust services
A check you wrote to buy shoes last week has not yet been approved by the bank. It is said to be:a. subtracted.b. certified.c. credited.d. endorsed.e. outstanding. e. outstanding.
Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty.a. checking accountb. U.S. Treasury billc. savings accountd. certificate of deposite. negotiable order of withdrawal (NOW) account d. certificate of deposit
The percentage of ____________ out of disposable income has decreased due to low interest rates and has impacted the investment choices of individuals.a. taxable income b. expenditure c. savings d. insurance c. savings
You are buying a large amount of merchandise through the mail from a dealer several hundred miles from you with whom you have never dealt before. The dealer will probably require that you pay him witha. a certified check b. a credit card c. cash d. overdraft protection a. a certified check
A lump-sum deposit of $8,000 left in a bank for 12 years at 9%, compounded annually, will result in an ending balance of: (Select the closest answer.)a. $96,000.b. $52,938.c. $22,504.d. $11,600.e. $16,640. c. $22,504.
A comprehensive deposit account; offered primarily by brokerage houses and mutual funds AMA (Asset Management Account)
Systems using the latest telecommunications and computer technology to electronically transfer funds into and out of customer’s accounts EFTSs (Electronic Funds Transfer Systems)
Specially coded plastic cards used to transfer funds from a customer’s bank account to the recipient’s account to pay for goods or services Debit Cards
Remote computer terminals that customers of depository institutions can use to make basic transactions, 24 hours a day, 7 days a week Automated teller machines (ATMs)
A booklet, provided with a supply of checks, used to maintain accurate records of all checking account transactions Checkbook ledger
The result of writing a check for an amount greater than the current account balance Overdraft
An arrangement between the account holder and the depository institution wherein the institution automatically pays a check that overdraws the account. Overdraft protection
An order made by an account holder instructing the depository institution to refuse payment on an already issued check Stop payment
Verifying the accuracy of your checking account balance in relation to the bank’s records as reflected in the bank statement, which is an itemized listing of all transactions in the checking account Account Reconciliation
A check payable to a third party that is drawn by a bank on itself in exchange for the amount specified plus, in most cases, a service fee (of $5 to $10) Cashier’s Check
A check sold by a large financial institution, typically in denotations ranging from $20 to $100, that can be used for making purchases and exchanged for local currencies in most parts of the world. Traveler’s Check
A personal check that is guaranteed by the bank on which it is drawn Certified Check
When interest earned in each subsequent period is determined by applying the normal rate of interest to the sum of the initial deposit and the interest earned in each prior period. Compound Interest
Interest that is paid only on the initial amount of the deposit Simple Interest
The promised rate of interest paid on savings deposit or changed on a loan. Nominal (stated) Rate of Interest
The annual rate or return that is actually earned (or charged) during the period the funds are held (or borrowed) Effective Rate of Interest
A type of savings instrument issued by certain financial institutions in exchange for deposit; Typically requires a minimum deposit and has a maturity ranging from seven days to as long as seven or more years Certificate of Deposit (CD)
A short-term debt instrument issued at a discount by the U.S. Treasury in its ongoing process of funding the national debt U.S. Treasury Bill
A savings bond issued in various denominations by the U.S. Treasury Series EE bonds
A savings bond issued at a face value by the U.S. Treasury; its practically fixed rates provides some inflation protection I Savings Bond

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