Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 1
1. Most banks offer essentially the same types of accounts.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
2. A transaction account allows transactions to occur at any time and in any number.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
3. Basic checking accounts always pay interest on the balance deposited in the account.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
4. Banks may require up to a seven-day notice from a depositor who wants to withdraw money from a time deposit.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
5. You cannot get your money from a certificate of deposit before the maturity date.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
6. Principal is the price paid for using money.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
7. Compound interest uses the same principal amount every time it is calculated.
a.
True
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 2
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2
8. Money doesn’t just mean currency, but also checks, ledger transfers, and even credit.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1
9. In the United States, the government plays the greatest role in determining how money is moving.
a.
True
b.
False
ANSWER:
False
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1
10. Banks are free to change governing documents, but they must give customers written notice of changes.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.1 – LO: 5.4.1
11. A joint tenancy checking account allows each owner to make deposits and withdrawals independently.
a.
True
b.
False
ANSWER:
True
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
12. The most common form of a transaction account is a
a.
savings account.
b.
checking account.
c.
money market account.
d.
certificate of deposit.
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
13. What term best describes companies obtaining financing directly from capital markets (without using banks for
financing)?
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 3
a.
rate chasers
b.
interbank transactions
c.
Check 21
d.
disintermediation of funds
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1
14. Which of the following is NOT a time deposit?
a.
savings account
b.
checking account
c.
money market account
d.
certificate of deposit
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
15. Which of the following accounts are you LEAST likely to encounter at a modern bank?
a.
checking account
b.
certificate of deposit
c.
money market account
d.
passbook savings account
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
16. Which of the following accounts is the MOST liquid?
a.
money market account
b.
certificate of deposit
c.
checking account
d.
savings account
ANSWER:
c
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
17. Adding interest to the principal and paying interest on the new total is called paying
a.
compound interest.
b.
simple interest.
c.
semiannual interest.
d.
total interest.
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 4
18. For the purposes of computing interest compounded daily, a year is generally considered to be
a.
336 days.
b.
360 days.
c.
365 days.
d.
366 days.
ANSWER:
b
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2
19. Which of the following statements about reserve requirements is true?
a.
Reserve requirements apply to the M1 and M2 money supply.
b.
Reserve requirements are the most important factor in bank lending.
c.
Reserve requirements do not change very often.
d.
If reserve requirements are low, banks must keep back more money and therefore have less to lend.
ANSWER:
c
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2
20. Which of the following governing documents list interest rates in effect at the time for various types of accounts?
a.
disclosure statements
b.
account rules
c.
fee schedules
d.
deposit rate schedules
ANSWER:
d
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.1 – LO: 5.4.1
21. A check that is dated six months or more before it is presented for payment or deposit is called a(n)
a.
stale check.
b.
postdated check.
c.
bounced check.
d.
overdraft check.
ANSWER:
a
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2
22. This Federal Reserve regulation requires banks to maintain adequate reserves for the funds they have on deposit.
a.
Regulation C
b.
Regulation CC
c.
Regulation D
d.
Regulation DD
ANSWER:
c
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 5
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2
23. ____________________ checking accounts offer a few simple services for minimal cost.
ANSWER:
Basic
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
24. All deposits to cover transactions that make automatic withdrawals or transfers to pay bills without writing checks are
called ____________________ deposits.
ANSWER:
checkable
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
25. A(n) ____________________ savings account provides a monthly or quarterly report detailing all account activity.
ANSWER:
statement
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
26. A(n) ____________________ savings account provides a ledger of activity that a teller updates when a customer
makes deposits or withdrawals.
ANSWER:
passbook
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
27. The date on which a certificate of deposit is paid is called the ____________________ date.
ANSWER:
maturity
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
28. A(n) ____________________ certificate is equivalent to a certificate of deposit, except it is offered by a credit union
rather than a bank.
ANSWER:
share
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
29. The beginning amount used to calculate interest is called ____________________.
ANSWER:
principal
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
30. ____________________ interest adds interest to the principal and pays interest on the new total.
ANSWER:
Compound
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 6
31. Banks make and receive deposits to each other in ____________________ transactions.
ANSWER:
interbank
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1
32. Consumers who perpetually move their funds among various accounts to obtain the highest interest rates at any point
in time are called ___________________.
ANSWER:
rate chasers
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.3 – LO: 5.2.3
33. A(n) ____________________ checking account has two or more owners, each of whom has equal and independent
access to it.
ANSWER:
joint
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
34. Natasha’s checking account charges a basic monthly fee of $5. It allows her to write ten checks each month for free; it
charges her $2 for every additional check she writes. The account also charges Natasha $1 each time she uses an ATM
machine. What total fees did Natasha pay in April if she wrote 17 checks and used the ATM machine six times?
ANSWER:
$25
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
35. Theo wrote 132 checks last year. How many checks did he write every month, on average?
ANSWER:
11
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
36. Calculate the simple interest earned on a savings account in nine months that begins with a deposit of $500 and pays 3
percent interest.
ANSWER:
$11.25
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
37. Augie’s savings account pays simple interest. He began with a deposit of $2,000; at the end of one year, he had earned
$80 in interest. Find the interest rate on the account.
ANSWER:
4 percent
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
38. Keri’s savings account pays simple interest at a rate of 4.5 percent. After nine months, the account had earned $202.50
in interest. Find the principal.
ANSWER:
$6,000
POINTS:
1
Name:
Class:
Date:
Copyright Cengage Learning. Powered by Cognero.
Page 7
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
39. Calculate the simple interest earned on a savings account in six months that begins with a deposit of $5,000 and pays 6
percent interest.
ANSWER:
$150
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
40. What is a demand deposit?
ANSWER:
A demand deposit is a deposit account that is payable on demand whenever the depositor
chooses.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
41. How do the total funds in transaction accounts affect the money supply?
ANSWER:
The total funds in transaction accounts affect the money supply because of their high
liquidity.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
42. What is a certificate of deposit?
ANSWER:
A certificate of deposit is a certificate offered by a bank that guarantees payment of a
specified interest rate until a designated date in the future.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
43. What is the basic formula for calculating simple interest?
ANSWER:
The basic formula for calculating simple interest is Principal × Rate × Time.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1
44. In general, what determines the money supply?
ANSWER:
The money supply is determined by the supply and demand for credit.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2
45. What are disclosure statements?
ANSWER:
Disclosure statements provide bank customers full information about bank policies. They are
required by law.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2
46. Describe the benefits of an express checking account. What are some disadvantages?
ANSWER:
Benefits of an express checking account include unlimited check writing, low minimum
balance requirements, and low or no monthly fees. However, such accounts often charge high
teller fees.
Name:
Class:
Date:
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1
47. Compare and contrast savings accounts and money market deposit accounts.
ANSWER:
Savings accounts are among the safest places to put money. Liquidity is high, but interest
income is relatively low. A money market deposit account offers a higher rate of interest than
a savings account, but it will typically require a higher initial deposit to open. In addition,
minimum balances to avoid fees are also higher, and liquidity is not as great as with a savings
account.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2
48. Explain the difference between APR and APY.
ANSWER:
APR stands for annual percentage rate; it is the nominal rate on which interest is calculated
per year. APY stands for annual percentage yield; it represents the effect of compounding.
APY varies according to the APR and the frequency of compounding.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2
49. Describe how the Federal Reserve can put more money into the economy through its open market operations.
ANSWER:
The Fed buys U.S. government securities on the open market. The Fed buys these securities
by creating new money, which the sellers of the securities deposit in financial institutions.
Thus, deposits flow from the Fed’s pool of new money directly into bank accounts, providing
banks more money to lend. The money supply expands as a result of the multiplier effect.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2
50. Name three things a bank must do to meet the requirements of Federal Reserve Regulation CC.
ANSWER:
To meet the requirements of Regulation CC, a bank must (1) provide consumers who have
transaction accounts, such as a checking account, with disclosures stating when their funds
will be available for withdrawal; (2) post a notice of the bank’s availability policy pertaining
to consumer accounts; and (3) include a notice of funds availability on the front of all
preprinted deposit slips.
POINTS:
1
LEARNING OBJECTIVES:
BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2