Exam 5: Banking and Interest Rates

The term structure of interest rates is measured by a(n) ________, which shows the interest rate offered at each maturity level.

If you were taking out a personal loan, the highest rate would probably be charged by a

Certificates of deposit (CDs) with shorter maturity dates tend to pay higher interest rates than those with longer maturity dates.

The Act that allows banks to transmit electronic images of checks, thus allowing funds to be transferred immediately is known as

You are purchasing a new car and are making a down payment of $6,500. To be assured of payment, the dealership would request that you provide a

A(n) ________ card allows you to pay for a purchase at a later time when the bill arrives.

Juan has $1,000 that he would like to invest in a CD. His bank offers two alternatives, a one-year CD paying 6% or a two-year CD paying 9% per annum. Juan has been reading that interest rates are rising, and, based on his research, he estimates that by year-end the rate on one-year CDs will increase to 10%. What alternative would give Juan the most interest and what would the total interest be?

Use the following two columns of items to answer the matching questions below: -depository institutions A)nondepository institutions that facilitate the purchase and sale of securities by firms or individuals B)financial institutions that accept deposits and provide loans C)financial institutions that offer a diverse set of services D)a nondepository institution that sells shares to individuals and uses the proceeds to invest in securities and create a mutual fund E)a nondepository institution that provides insurance to protect against adverse events F)a nondepository institution that specializes in providing personal loans

The interest rate is composed of the ________ and the ________.

Bank ATM charges may be substantial if you make many transactions monthly and use out-of-network machines.

Deposits at commercial banks are insured by a government-owned insurance agency called the

A mutual fund is a means by which investors with relatively small amount of money can invest in a portfolio of securities.

Finance companies are more selective in choosing the borrowers they serve, and therefore they usually charge lower interest rates than banks or credit unions.

During the financial crisis that began in 2008, what was the key aspect in banks that made savers comfortable that their money was safe?

Wanda Clark expects interest rates to decline in the next few months. To maximize her earnings, she should put her savings in a

Securities firms primarily sell insurance to protect individuals from adverse events.

Use the following two columns of items to answer the matching questions below: -risk premium A)an additional return beyond the risk-free rate B)a return on an investment that is guaranteed for a specified period

Savings institutions differ from commercial banks in that they tend to focus less on providing commercial loans.

If the government borrows funds to finance a military build-up, this will cause a

When the Fed loosens monetary policy, interest rates will ________ and money supply will ________.