Chapter 4—Managing Your Cash and Savings
1. One could expect to earn a higher rate of interest on a certificate of deposit than on a checking account.
a.
True
b.
False
True
Easy
2. A savings account may be a useful tool in managing everyday household transactions.
a.
True
b.
False
False
Moderate
3. Saving accounts are sometimes referred to as demand deposits.
a.
True
b.
False
False
Easy
4. Specialization within the financial institutions industry continues to increase.
a.
True
b.
False
Moderate
Chapter 4—Managing Your Cash and Savings
5. The rate of return on liquid assets is relatively high compared to other types of investments.
a.
True
b.
False
False
Challenging
6. NOW accounts are appropriate for people who need to keep substantial amounts of money in a checking account and
use it for numerous transactions each month.
a.
True
b.
False
True
Moderate
7. Credit unions typically pay higher rates of return on savings than banks and savings and loan associations.
a.
True
b.
False
True
Easy
Chapter 4—Managing Your Cash and Savings
8. There is a penalty for early withdrawal of funds from CDs purchased from brokerage firms.
a.
True
b.
False
False
Easy
9. Certificates of deposit can be purchased only at banks, savings and loan associations, and credit unions.
a.
True
b.
False
False
Challenging
10. One can avoid early withdrawal penalties on CDs by purchasing them through brokerage firms.
a.
True
b.
False
True
Challenging
11. Money market mutual funds are insured up to $250,000 by the FDIC if purchased at an insured bank.
a.
True
b.
False
False
Chapter 4—Managing Your Cash and Savings
12. Money market deposit accounts are insured by the FDIC if purchased at an insured bank.
a.
True
b.
False
True
Moderate
13. FDIC covers stocks, bonds, and mutual funds purchased at banks.
a.
True
b.
False
False
Challenging
14. Asset management accounts are protected by the Federal Deposit Insurance Corporation.
a.
True
b.
False
False
Challenging
Challenging
Chapter 4—Managing Your Cash and Savings
15. There are no limitations on check writing for both MMDAs and MMMFs.
a.
True
b.
False
False
Moderate
16. Asset management accounts (AMAs) combine many cash management services into one account.
a.
True
b.
False
True
Moderate
17. S&Ls are the most popular segment of the financial institutions industry.
a.
True
b.
False
False
Moderate
18. Another term for the interest paid by credit unions on deposits is dividends.
a.
True
b.
False
True
Chapter 4—Managing Your Cash and Savings
19. The main business of an S&L is to provide home mortgage and home improvement loans.
a.
True
b.
False
True
Moderate
20. Savings and loan associations (S&Ls) channel the savings of depositors primarily into automotive loans.
a.
True
b.
False
False
Moderate
21. Savings and loan associations usually offer non-interest bearing checking accounts.
a.
True
b.
False
False
Moderate
Easy
Chapter 4—Managing Your Cash and Savings
22. The annual percentage yield (APY) formula considers compounding when determining an interest rate.
a.
True
b.
False
True
Moderate
23. Savings banks are mainly found in the northeastern United States.
a.
True
b.
False
True
Easy
24. Credit unions are mainly found in the northeastern United States.
a.
True
b.
False
False
Moderate
25. Credit union members are expected to have some common bond.
a.
True
b.
False
Chapter 4—Managing Your Cash and Savings
True
Moderate
26. From the bank’s perspective, ATM transactions are more costly than online banking transactions.
a.
True
b.
False
True
Moderate
27. EFTS allow you to make payments that occur on a regular basis.
a.
True
b.
False
True
Easy
28. Convenience and improved record keeping are two advantages cited for online bill payment.
a.
True
b.
False
True
Easy
Chapter 4—Managing Your Cash and Savings
29. Money market mutual funds invest in long-term treasury securities and other types of bonds.
a.
True
b.
False
False
Challenging
30. A regular savings account is a time deposit.
a.
True
b.
False
True
Easy
31. As of 2014, the FDIC insures depositor’s funds up to $250,000 at member banks.
a.
True
b.
False
True
Easy
32. You should insure valuables, even if they are kept in a safe-deposit box.
a.
True
b.
False
Chapter 4—Managing Your Cash and Savings
True
Moderate
33. Financial institutions expect demand deposits to remain on deposit for a longer period of time than time deposits.
a.
True
b.
False
False
Challenging
34. A money market mutual fund is one way to participate indirectly in the purchase of money market securities.
a.
True
b.
False
True
Easy
35. If one wanted to make monthly deposits to accumulate funds for future expenditures, a money market account would
be an appropriate savings vehicle.
a.
True
b.
False
True
Chapter 4—Managing Your Cash and Savings
36. Asset management accounts (AMAs) are offered by brokerage firms and are protected by the Securities Investor
Protection Corporation.
a.
True
b.
False
True
Moderate
37. Most credit unions provide their members with deposit insurance.
a.
True
b.
False
True
Easy
38. For married depositors, it is possible to increase the $250,000 of deposit insurance to up to $1,500,000 by opening a
variety of accounts in different depositor names at the same institution.
a.
True
b.
False
True
Moderate
Chapter 4—Managing Your Cash and Savings
39. Mark Helig has a checking account in his name and a joint savings account with his wife at the same bank. The
maximum amount of deposit insurance the Heligs have is $250,000.
a.
True
b.
False
False
Moderate
40. If Suzie has $2,000 in checking, $50,000 in a money market deposit account, and $75,000 in certificates of deposit (all
individual accounts) at her local bank, her accounts would be completely insured through FDIC.
a.
True
b.
False
True
Moderate
41. If Lois has $2,000 in checking, $50,000 in a money market mutual fund, and $75,000 in certificates of deposit (all
individual accounts) at her local bank, her accounts would be insured through FDIC for $77,000.
a.
True
b.
False
False
Moderate
42. Debit and ATM card transactions are linked to your checking account.
a.
True
b.
False
True
Chapter 4—Managing Your Cash and Savings
43. Although there are no legal minimum balances for a NOW account, many institutions impose their own requirement,
often between $500 and $1,000 before they pay any interest.
a.
True
b.
False
True
Moderate
44. ATM transactions require the use of a PIN.
a.
True
b.
False
True
Easy
45. Internet-only banks typically pay lower interest rates on savings than traditional banks.
a.
True
b.
False
False
Easy
Easy
Chapter 4—Managing Your Cash and Savings
46. Stop-payment services are easier with electronic funds transfers than with traditional check payments.
a.
True
b.
False
False
Moderate
47. Treasury bills are sold at their face value.
a.
True
b.
False
False
Easy
48. Treasury bills are sold at a discount of their maturity value.
a.
True
b.
False
True
Easy
49. The minimum denomination for Treasury bills is now $1,000.
a.
True
b.
False
Chapter 4—Managing Your Cash and Savings
False
Easy
50. If your bank states that it compounds monthly, the effective interest rate (APY) will be greater than the nominal
interest rate.
a.
True
b.
False
True
Challenging
51. Your savings will grow faster with monthly interest compounding than with quarterly interest compounding.
a.
True
b.
False
True
Challenging
52. Compound interest means that a savings account earns interest on the interest previously earned.
a.
True
b.
False
True
Chapter 4—Managing Your Cash and Savings
53. A certified check is a personal check for which the bank guarantees the funds are available.
a.
True
b.
False
True
Easy
54. A bank cannot advertise as “free” a checking account that requires a minimum balance, even though depositors who
maintain the minimum balance pay no service fees.
a.
True
b.
False
True
Challenging
55. Joint checking accounts typically imply the right of survivorship if one party should die.
a.
True
b.
False
True
Moderate
56. You can stop payment when you purchase an item with your debit card.
Chapter 4—Managing Your Cash and Savings
a.
True
b.
False
False
Moderate
57. The rate of return on a Series EE savings bond will be constant over the life of the bond.
a.
True
b.
False
False
Challenging
58. The rate of return on a Series EE savings bond changes semiannually.
a.
True
b.
False
True
Moderate
59. Series EE Savings bonds are also called Patriot Bonds.
a.
True
b.
False
True
Easy
Chapter 4—Managing Your Cash and Savings
60. Series HH bonds are issued at their full face value and pay interest semiannually at the current fixed rate.
a.
True
b.
False
True
Moderate
61. You should invest in long-term CDs when you expect interest rates to fall.
a.
True
b.
False
True
Challenging
62. The nominal rate of interest will be lower than the effective rate of interest when an account compounds monthly.
a.
True
b.
False
True
Challenging
63. You put $1,000 into a 12-month certificate of deposit. After seven months, you really need the money. The bank will
Chapter 4—Managing Your Cash and Savings
let you have it before 12 months, but you will pay a penalty.
a.
True
b.
False
True
Moderate
64. A major reason for overdrafts is the inability of a check writer to keep an accurate checkbook ledger.
a.
True
b.
False
True
Moderate
65. If your checkbook is lost or stolen, there is no need to stop payment on the checks.
a.
True
b.
False
True
Moderate
66. A cashier’s check is written on the bank’s account rather than on a customer’s account.
a.
True
b.
False
Moderate
Chapter 4—Managing Your Cash and Savings
67. A certified check is written on the bank’s account rather than on a customer’s account.
a.
True
b.
False
False
Moderate
68. Low interest rates that have persisted since the financial crisis of 2008-09 have been a net benefit to retirees.
a.
True
b.
False
False
Moderate
69. Lower borrowing costs encourage the substitution of debt for equity in corporate capital structures, which increases
financial risk.
a.
True
b.
False
True
Challenging
70. Low interest rates have increased the supply of credit.