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Chapter 4—Managing Your Cash and Savings
a.
True
b.
False
71. With low interest rates, savers have begun investing in stock where higher yields can be found.
a.
True
b.
False
72. In the wake of the recent financial crisis, the U.S. personal saving rate decreased.
a.
True
b.
False
73. Factors typically influencing the choice of where to maintain a checking account are
a.
convenience and cost
b.
convenience and services
c.
cost and services
d.
convenience, services, and cost
Chapter 4—Managing Your Cash and Savings
74. Money market deposit accounts
a.
allow unlimited check writing.
b.
are typically federally insured.
c.
have stated maturity dates.
d.
are offered only by credit unions.
e.
all of these.
75. Money market mutual funds
a.
allow check writing.
b.
are not federally insured.
c.
pool the funds of many small investors.
d.
pay interest rates of 1 to 3 percent higher than those paid on regular savings accounts.
e.
all of these.
76. Which of the following would be an appropriate savings vehicle if you expected interest rates to fall over the next few
months?
a.
money market deposit account
b.
money market mutual fund
c.
certificate of deposit
d.
Series EE US savings bond
e.
a and b
Chapter 4—Managing Your Cash and Savings
77. Janice Sanders plans on saving $12,000 for 3 years until she returns to college for her master's degree in personal
financial planning. She would like to receive a fixed rate of return over that period. Which of the following would you
recommend?
a.
money market deposit account
b.
1-year certificate of deposit
c.
3-year certificate of deposit
d.
Series EE US savings bond
e.
b or c
78. When an S&L is a mutual association, it means that it is owned by the
a.
borrowers.
b.
creditors.
c.
depositors.
d.
management.
e.
local government.
79. Historically, the primary purpose of savings and loan associations was to
Chapter 4—Managing Your Cash and Savings
a.
provide passbook accounts paying interest above that of commercial banks.
b.
compete directly with commercial banks.
c.
provide NOW accounts.
d.
provide demand deposits.
e.
channel savings into mortgages.
80. Credit unions are
a.
mutual associations.
b.
mortgage lenders.
c.
available to the general public.
d.
special commercial lenders.
e.
not providers of insured deposits.
81. Compared to other depository financial institutions, credit unions
a.
are run to benefit their members.
b.
pay higher interest on savings.
c.
charge lower rates on loans.
d.
a, b, and c.
e.
none of the above.
Chapter 4—Managing Your Cash and Savings
82. Which of the following is a potential advantage of online bill payment systems?
a.
Privacy
b.
FDIC insurance
c.
Time and postage savings
d.
Efficient startup
e.
Use of float
83. The minimum denomination of T-bills you can buy is
a.
$1,000.
b.
$5,000.
c.
$10,000.
d.
$20,000.
e.
none of these.
84. Share draft accounts are commonly offered by
a.
commercial banks.
b.
savings and loan associations.
c.
mutual savings banks.
d.
credit unions.
e.
insurance companies.
Chapter 4—Managing Your Cash and Savings
85. A(n) ____ is not an interest-bearing account.
a.
money market mutual fund
b.
money market deposit account
c.
NOW account
d.
asset management account
e.
regular checking account
86. A ____ is an interest-bearing checking account.
a.
certificate of deposit
b.
Treasury bill
c.
NOW account
d.
Series EE US savings bond
e.
regular checking account
87. Connie Shockey wants to put funds in an account that does not offer checking privileges because she has a tendency to
overspend. Which of the following would fit her criteria?
a.
NOW account
b.
A DDA with overdraft protection
c.
money market mutual fund
d.
money market deposit account
e.
certificate of deposit
Chapter 4—Managing Your Cash and Savings
88. The more frequently a bank compounds interest, ____ will be.
a.
the higher the stated interest rate
b.
the lower the stated interest rate
c.
the greater the effective rate of interest
d.
the lower the APY
e.
both a and c
89. Commercial banks are insured by the
a.
Financial Deposit Insurance Association.
b.
Federal Depositors Assurance Corporation.
c.
Federal Deposit Insurance Corporation.
d.
Financial Deposit Insurance Company.
e.
Federal Demand Deposit Corporation.
90. Janie Long has checking and savings accounts in a federally insured financial institution. The maximum amount of her
insurance coverage is
a.
$50,000 per account.
b.
$250,000.
Chapter 4—Managing Your Cash and Savings
c.
$100,000 per account.
d.
$200,000.
e.
$200,000 per account.
91. Christina works at a company that offers direct deposit of her paycheck. This service is called
a.
an ATM service.
b.
a FDIC service.
c.
a money market service.
d.
an EFT service.
e.
an overdraft service.
92. Vicki Vasquez owns a six-month treasury bill that is four months from maturity. She recently encountered medical
problems and needs the money now. She
a.
can request in writing for the treasury to pay her early.
b.
can sell the T-bill in the open market.
c.
will have to wait until the maturity date to get her money.
d.
can call a toll-free number to request the money.
e.
can go to the bank and withdraw the funds needed.
Chapter 4—Managing Your Cash and Savings
93. Which of the following is not a strategy to building your savings?
a.
Pay yourself first.
b.
Reinvest interest and dividends.
c.
Splurge once in a while.
d.
Set up a retirement plan.
e.
All the above are strategies.
94. A lump sum deposit of $8,000 left in the bank for 12 years at 9% compounded annually will result in an ending
balance of (select the closest answer)
a.
$11,600.
b.
$16,640.
c.
$22,500.
d.
$52,938.
e.
$96,000.
95. Harry just received $2,000 for graduation. He plans on investing this money for five years at 8% compounded
annually. If he accomplishes this, Harry will have in an ending balance of (Use time value tables or financial calculator)
a.
$2,160.
b.
$2,520.
c.
$2,608.
d.
$2,938.
e.
$3162.
Chapter 4—Managing Your Cash and Savings
96. A deposit of $6,000 saved in a CD for 10 years at 3% compounded annually will be worth (select the closest answer)
a.
$7,340.
b.
$7,800.
c.
$8,064.
d.
$8,678.
e.
$9,005.
97. John Anderson deposited $10,000 in a CD for 3 years at 5%. It should now be worth (Use time value tables or
financial calculator)
a.
$10,500.
b.
$10,725.
c.
$11,400.
d.
$11,580.
e.
$12,400.
98. If interest on a savings account is compounded semiannually, the effective rate of interest will be
a.
higher than the nominal rate.
b.
lower than the nominal rate.
c.
the same as the simple rate.
d.
equal to the nominal rate.
e.
lower than the simple rate.
Chapter 4—Managing Your Cash and Savings
99. The stated interest rate on your account is 7.12% with interest paid semiannually. Your effective rate of interest will
be
a.
lower than 7.12%.
b.
equal to 7.12%.
c.
greater than 7.12%.
d.
none of these.
100. The stated interest rate on your account is 5% with interest compounded monthly. If you deposit $50 each month,
how much will you have in your account in 5 years? (Use time value tables or financial calculator.)
a.
$3,000
b.
$3,050
c.
$3,200
d.
$3,400
e.
$4,350
101. The stated interest rate on your account is 3.5%, interest compounded monthly. If you deposit $100 each month, how
much will you have in your account in 8 years? (Use time value tables or financial calculator.)
a.
$9,600
Chapter 4—Managing Your Cash and Savings
b.
$9,936
c.
$11,060
d.
$12,288
e.
$12,350
102. If you invest $100 at 8% for one year, compounded semiannually, at the end of the year your balance will be (use
time value tables or financial calculator)
a.
$104.08.
b.
$108.00.
c.
$108.16.
d.
$112.12.
e.
none of these.
103. If you invest $1,200 per year at the end of each year for 40 years at an 8% rate of return, you will have accumulated
(use time value table or financial calculator)
a.
$ 48,000.
b.
$ 51,840.
c.
$310,862.
d.
$379,000.
e.
$384,000.
Chapter 4—Managing Your Cash and Savings
104. Sandy wants to go on a trip in 10 years. If she invests $1,000 per year at the end of each year for 10 years at a 12%
interest rate, she will accumulate ____ to spend on her trip. (Use time value table or financial calculator.)
a.
$10,610
b.
$12,130
c.
$15,105
d.
$16,710
e.
$17,549
105. Gordon started saving $25 a month at age 20 in an account earning 4% compounded monthly. At age 40, he will
have ____ in this account. (Use time value tables or financial calculator.)
a.
$6,000
b.
$7,170
c.
$9,169
d.
$9,255
e.
$9,890
106. Terry started saving $50 a month at age 25 in an account earning 6% compounded monthly. At age 40, she will have
____ in this account. (Use time value tables or financial calculator.)
a.
$5,252
b.
$9,000
c.
$9,540
d.
$13,962
e.
$14,541
Chapter 4—Managing Your Cash and Savings
107. Higher interest rates on certificates of deposit are associated with
a.
higher account balances.
b.
shorter time periods.
c.
longer time periods.
d.
both a and b.
e.
both a and c.
108. Lower interest rates on certificates of deposit are associated with
a.
higher account balances.
b.
shorter time periods.
c.
longer time periods.
d.
both a and b.
e.
both a and c.
109. Funds in a ____ must remain on deposit for the stated time period in order to avoid an interest penalty.
a.
certificate of deposit
b.
U.S. Treasury bill
c.
checking account
Chapter 4—Managing Your Cash and Savings
d.
mutual fund
e.
regular savings
110. An asset management account provides a
a.
checking account.
b.
money market deposit account.
c.
brokerage account.
d.
line of credit.
e.
all of the above.
111. Joe Gustafson is a very busy person who likes to handle all his financial service needs with one account if possible.
Which of the following types of accounts would best serve this need?
a.
Checking account
b.
Money market deposit account
c.
Brokerage account
d.
Asset management account
112. Whenever you write a check or make a deposit, an entry should be made in your
Chapter 4—Managing Your Cash and Savings
a.
deposit slip.
b.
checkbook ledger.
c.
check.
d.
ATM account.
e.
personal check.
113. The interest earned on your Series EE savings bonds
a.
will be taxable every year as it accrues.
b.
will be tax-deferred until redemption.
c.
will be subject to both federal and state income taxes upon redemption.
d.
is tax-free of both federal and state income taxes upon redemption.
114. Which of the following accounts has special tax advantages under certain conditions when used to fund qualified
college education expenses?
a.
Certificate of deposit
b.
U.S. Treasury bill
c.
Series EE savings bonds
d.
Money market mutual fund
e.
Regular savings
Chapter 4—Managing Your Cash and Savings
115. If you write a check for an amount greater than your account balance, the result will be
a.
an endorsement.
b.
a reconciliation.
c.
an overdraft.
d.
a share draft.
e.
a stop payment.
116. .When reporting errors or unauthorized transactions, it is best to notify your bank
a.
by telephone.
b.
by letter, keeping a copy for your files.
c.
by telephone and follow-up letter, keeping a copy for your files.
d.
by none of the above.
117. A check you issued has been stolen. You can prevent it from being withdrawn from your account by an unauthorized
person by
a.
writing a new check.
b.
depositing the correct amount of money.
c.
requesting a stop-payment order.
d.
tearing up the check.
e.
properly endorsing the check.
Chapter 4—Managing Your Cash and Savings
118. When doing a bank reconciliation, interest earned on your account should be
a.
deducted from your checkbook ledger.
b.
added to your checkbook ledger.
c.
ignored because the bank has already recorded it.
d.
listed as outstanding.
e.
compared to your interest calculations.
119. A check you wrote to buy shoes last week has not yet been processed by the bank. It is said to be
a.
outstanding.
b.
in transit.
c.
endorsed.
d.
certified.
e.
subtracted.
120. You are going on an overseas trip and you want to have checks that are easily converted into local currency. You
should purchase
a.
cashier's checks.
b.
certified checks.
c.
conditional checks.
d.
traveler's checks.
e.
guaranteed checks.
