Exam 4: Managing Your Cash and Savings

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. You are planning to deposit $5,000 in a bank. At the end of one year, you will have more money in this account if interest is compounded [ semiannually | quarterly ].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The [ nominal | effective ] rate of interest is the annual rate of return that is actually earned during the period the funds are held.

The minimum amount that you must keep in an account every day is an important criterion when comparing the features and requirements of different checking accounts offered by a bank.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. A bank customer would expect to be able to write checks on his regular checking account and on his [ certificate of deposit (CD) | money market mutual fund (MMMF) ].

Extremely low interest rates favor investors and boost the incentive to save.

If you write a check for an amount greater than your account balance, the result will be a(n):

Harry received a scholarship of $2,000. He plans to invest this money for 5 years at 8%, compounded annually. If he accomplishes this, what will Harry's ending balance be? (Round the answer to the nearest dollar.)

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Low interest rates tend to signal [ sluggish | healthy ] economic growth.

A certified check is a personal check that a bank certifies to guarantee that the funds are available.

An investor receives the highest interest rate on his or her:

Compound interest means that a savings account earns interest on the interest previously earned.

Alice lost her electronic funds transfer system (EFTS) card and reported it missing the next day. She found that $800 had been withdrawn from her savings account. Alice's loss is equal to:

Funds invested in a _____ should not be withdrawn for a stated period in order to avoid an interest penalty.

Low interest rates create economic distortions, especially when real, inflation-adjusted interest rates are positive.

Low interest rates result in:

Mary has calculated her adjusted bank balance as $500. She notices that her bank's service charges are $20 for this period. Mary's ending balance in her bank account is:

The low interest rates after the financial crisis of 2007-2008 have been beneficial to:

Nondepository institutions are referred to as banks.

Jane is a college student who withdraws cash at least five times a week to meet her everyday expenses. Jane should have a checking account with:

The Federal Deposit Insurance Corporation (FDIC) covers consumer accounts at credit unions.