question

1. When Flo says she's going to "the bank," she may be implying that she is visiting a credit union or stopping at an ATM.

answer

TRUE

question

2. When Ted needs cash, his choices include liquidating savings and borrowing.

answer

TRUE

question

3. A savings account is also known as a demand deposit.

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FALSE A savings account is a time deposit. A checking account is a demand deposit.

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4. If a bank allows online transactions, it must also allow face-to-face transactions at the bank.

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FALSE There is no requirement to have a specific location. Some banks are known as "e-banks."

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5. Making transactions using a credit card will immediately reduce your bank balance.

answer

FALSE Debit cards affect bank balances. Credit cards are separate from bank accounts.

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6. The only question you should ask yourself when selecting a financial service provider is "Where can I get the best return on my savings?"

answer

FALSE This is only one of the basic questions to be asked.

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7. A commercial bank is the same thing as a credit union.

answer

FALSE Both are financial institutions; however, they are different types of organizations.

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8. A loan from a pawnshop will be more expensive than one from a bank.

answer

TRUE

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9. The best option for borrowing money at a low rate is to use a payday loan organization.

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FALSE Payday loans have exorbitant interest rates.

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10. If you get a big-screen television from a rent-to-own center, you will be certain to own it after a period of time.

answer

FALSE You must complete a certain number of monthly or weekly payments in order to own the item.

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11. A benefit of investing in a certificate of deposit is the penalty for early withdrawal.

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FALSE This is a disadvantage of CDs.

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12. A bump-up CD allows an investor to increase the amount invested.

answer

FALSE A bump-up CD has higher rates at various intervals.

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13. A callable CD allows investors to 'cash in' their investment early.

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FALSE The bank may call in the CD after a period of time.

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14. If you think that rates will fall, you should buy a long-term CD to lock in your rate now.

answer

TRUE

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15. All money market funds are not covered by federal deposit insurance.

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TRUE In 2008 money market funds that paid a fee were covered by federal deposit insurance as a temporary move to restore confidence in money market funds. Prior to this time, money market funds were not covered.

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16. I bonds earn interest based on a fixed rate plus inflation.

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TRUE

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17. HH bonds are also known as Patriot Bonds.

answer

FALSE EE bonds are called Patriot Bonds after the September 11, 2001 terrorist attacks.

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18. The Truth in Savings Act requires financial institutions to disclose the interest rate on loans.

answer

FALSE This act requires disclosure on savings accounts.

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19. As inflation rates increase, the interest rates offered to savers usually increases.

answer

TRUE

question

20. Liquidity and rate of return refer to the same thing.

answer

FALSE Liquidity and rates are tradeoffs. Liquidity allows one to withdraw money quickly without significant fees or loss of value. Many people trade off liquidity for a higher return.

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21. The 'safety' concern with banks and credit unions refers to the potential loss of money due to investors' bad spending habits.

answer

FALSE Insurance prevents a loss of money due to the failure of an insured institution.

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22. In October 2008, the FDIC announced the temporary Transaction Account Guarantee Program and increased coverage for accounts at insured institutions to $200,000 per depositor.

answer

FALSE The limit is $250,000 until December 31, 2009. This question may be modified as the FDIC changes its coverage.

question

23. Two years ago, Sean deposited money into a certificate of deposit and received a toaster. The value of the toaster reduced the amount of interest he earned for the first year.

answer

FALSE If Sean would have withdrawn his money before a certain time period, then some of the earnings may have been used to cover the cost of the toaster.

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24. Each year, fewer and fewer checks are being written.

answer

FALSE Although paper checks account for a smaller portion of payments each year, they are still the common source for most debit card transactions and online payments.

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25. A college ID that includes prepaid amounts for meals is called a debit card.

answer

FALSE A college ID that stores prepaid amounts as well as other information is a smart card.

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26. Due to Check 21, the processing time for checks has increased.

answer

FALSE Check 21 shortened the processing time.

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27. Lydia found a check that she was given for her birthday 9 months earlier. Her bank should refuse to cash the check.

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TRUE Banks usually do not honor checks with "stale" dates, usually 6 months old or more.

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28. Reconciling a checking account is not really necessary since the bank statement includes all activity from the bank's perspective.

answer

FALSE Banks sometimes make errors, so a bank reconciliation should be done each month.

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29. Common payment choices for everyday activities include all except

answer

D. Short-term loan

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30. Many people make mistakes when managing current cash needs. Which of these is NOT a frequently made mistake?

answer

B. Budgeting spending

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31. A time deposit is also known as

answer

D. A savings account

question

32. A demand deposit is also known as

answer

A. A checking account

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33. A credit card is a type of

answer

C. Loan

question

34. A legal agreement that provides for the management and control of assets is known as

answer

B. A trust

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35. Claudette's grandchildren are 7 and 9 years old. When Claudette passed away, her grandchildren inherited her money. However, the will stipulated that they should not get control of the money until age 25. Which of the following should be set up to provide for the management and control of the funds?

answer

B. A trust

question

36. Franklin is planning for a purchase of a vehicle in two years. Since he wants to be certain that his funds are safe, which of the following should he use?

answer

D. A savings account

question

37. Investments and tax assistance, both tools for financial planning, are also known as

answer

E. Financial services

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38. An account that provides a complete financial services program for a single fee is known as

answer

A. A cash management account

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39. Brenda lost her debit card. When she realized it was gone, her account had $173 in unauthorized charges. She notified her financial institution within two days. How much is she potentially liable for?

answer

C. $50

question

40. Brandon lost his debit card. When he realized it was gone, his account had $238 in unauthorized charges. Since he was embarrassed about his loss, he didn't contact his financial institution for 45 days. What is the most that he liable for?

answer

D. $238

question

41. ATM stands for

answer

C. Automatic teller machine

question

42. Which of the following is NOT a financial publication that can provide information about financial services and economic conditions?

answer

C. The Daily Market

question

43. When you select a financial service provider, you should ask all of the questions except A. Will I be able to borrow money if I need it? B. How can I minimize the cost of checking and payment services? C. Where can I get the best return on my savings?

answer

D. All of the questions above should be asked.

question

44. When you select a financial service provider, you may find all of the following to be major factors except. A. Company logo B. Convenience C. Fee structure and other charges D. Personal service E. Rates for savings and borrowed funds

answer

A. Company logo

question

45. All of the following are deposit institutions except A. Commercial bank B. Credit union C. Finance company D. Mutual savings bank E. Savings and loan association

answer

C. Finance company

question

46. All of the following are non-deposit institutions except A. Credit card company B. Investment company C. Life insurance company D. Mortgage company E. Payday loan company

answer

E. Payday loan company

question

47. Which of the following usually offers mutual funds?

answer

B. Investment company

question

48. Which of the following primarily provides loans for home purchases?

answer

D. Mortgage company

question

49. When Angela wanted to provide financial security for her dependents, she considered purchasing a specific type of account at a ______

answer

C. Life insurance company

question

50. Billy accepted a job at a company that specializes in providing money for short-term retail lending. Where did he go to work?

answer

A. Credit card company

question

51. Which of the following will likely provide the most expensive access to funds?

answer

E. Payday loan company

question

52. Cathy wanted to buy some investments. To which of the following should she go?

answer

A. Commercial bank

question

53. Which of the following offers checking, savings, lending, and other services?

answer

A. Commercial bank

question

54. In which of the following are most of the investments insured? A. Commercial bank B. Check-cashing outlet C. Pawnshop D. Payday loan facility E. Rent-to-own center

answer

A. Commercial bank

question

55. Harvey needed some cash quickly, so he received a short-term loan based on the value of an old ring. Where did he go?

answer

C. Pawnshop

question

56. When Imogene brought a necklace to a _______, she received a loan based on its value.

answer

C. Pawnshop

question

57. When Jack picked up a personal computer from the _____, he really was leasing it.

answer

E. Rent-to-own center

question

58. Louise got caught in a cash flow trap and needed money quickly. Unfortunately, she didn't shop around and she went to a _____. As a result, her annual percentage rate was higher than 375%!

answer

D. Payday loan facility

question

59. Why are some financial service operations referred to as financial supermarkets?

answer

A. They offer a combination of services from one source

question

60. A drawback of a savings account is

answer

D. Low rate of return

question

61. A drawback of a regular savings account is

answer

A. Low rate of return

question

62. Another name for a regular savings account is a

answer

E. Statement account

question

63. A certificate of deposit that has different interest levels based on market performance is called a

answer

E. Stock-indexed CD

question

64. Karen wanted a certificate of deposit that would definitely be available until the maturity date. She would NOT want to consider a

answer

B. Callable CD

question

65. Wanda bought a certificate of deposit and automatically received a free bike. She purchased a

answer

D. Promotional CD

question

66. Xavier bought a certificate of deposit whose interest rate changes. In fact, he might even earn 0% interest on his investment for a time. He purchased a

answer

E. Stock-indexed CD

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