Question 1

Investment banking firms are organizations that assist individuals in acquiring personal loans, investing in corporate securities, and purchasing bonds.

Accepted Answer

A) True 
 B)False

Question 2

A certificate of deposit is similar to a savings account except that the bank agrees to pay the depositor a guaranteed interest rate for money left on deposit for a specified period of time.

Accepted Answer

A) True 
 B)False

Question 3

How do automated teller machines, automated clearinghouses, point-of-sale terminals, and electronic check conversion affect the way people bank and perform financial transactions?

Accepted Answer

The answer of How do automated teller machines, automated clearinghouses,...

Question 4

Which of the following statements is false?

Accepted Answer

A)  Inflation is a general rise in the level of prices. 
B)  Inflation can affect an individual's purchasing power when money is used as a store of value. 
C)  The consumer price index is based on two factors: the cost of housing and the cost of transportation. 
D)  The consumer price index measures the changes in prices of goods purchased by a typical consumer. 
E)  The base amount for the consumer price index is 100.

Question 5

The primary function of the Fed is to

Accepted Answer

A)  charter national banks. 
B)  regulate the supply of money in the world to support capitalism. 
C)  appoint its board members. 
D)  charter district banks. 
E)  regulate the supply of money in the United States to maintain a healthy economy.

Question 6

Suzanne is considered a member of her financial institution, which provides checking, savings, and other financial services. She is eligible for membership because she is a teacher. This financial institution is a

Accepted Answer

A)  national bank. 
B)  savings and loan association. 
C)  mutual savings bank. 
D)  commercial bank. 
E)  credit union.

Question 7

With a margin requirement of 50 percent,

Accepted Answer

A)  a bank has to keep 50 percent of its deposits with its Federal Reserve District Bank or within its own vaults. 
B)  a bank can lend 50 percent of its deposits to individuals and firms. 
C)  an investor purchasing $6,000 in stock must pay at least $3,000 of it in cash. 
D)  an investor purchasing $6,000 in stock must pay at least $50 of it in cash. 
E)  investors must invest in something yielding a 50 percent return on their investment.

Question 8

Which of the following would provide information about the creditworthiness of a business customer?

Accepted Answer

A)  D&B 
B)  Experian 
C)  Trans Union 
D)  Equifax Credit Information Services 
E)  The Federal Reserve System

Question 9

The standard unit of money must be divisible into smaller units to accommodate small purchases as well as large ones.

Accepted Answer

A) True 
 B)False

Question 10

Banks must meet certain requirements before they receive a charter, or permission to operate from authorities, because

Accepted Answer

A)  bankers can't be trusted. 
B)  they own lots of money. 
C)  they control the companies to which they make loans. 
D)  there are thousands of them in the United States. 
E)  they deal with money belonging to other individuals and firms.

Question 11

Describe the banking services provided by insurance companies, pension funds, brokerage firms, finance companies, and investment banking firms.

Accepted Answer

The answer of Describe the banking services provided by insurance...

Question 12

First State Bank has $50 million in deposits, and the reserve requirement is 10 percent. How much can it lend?

Accepted Answer

A)  $5 million 
B)  $50 thousand 
C)  $40 million 
D)  $55 million 
E)  $45 million

Question 13

When Lindsey applies for an auto loan, the bank orders a credit report to see if she has any past bankruptcies or a history of making late payments. The bank is concerned about Lindsey's

Accepted Answer

A)  character. 
B)  collateral. 
C)  conditions. 
D)  capacity. 
E)  capital.

Question 14

During periods of high inflation, money loses which essential characteristic?

Accepted Answer

A)  Divisibility 
B)  Portability 
C)  Stability 
D)  Durability 
E)  Difficulty of counterfeiting

Question 15

Name the five Cs of credit management. Why is each important?

Accepted Answer

The answer of Name the five Cs of credit management....

Question 16

When the Fed buys government securities, there is less money in the economy available for investment, purchases, or lending.

Accepted Answer

A) True 
 B)False

Question 17

If Jamie wanted to purchase Disney stock using borrowed money and had $4,000 of her own money to use, what is the maximum amount of stock she can purchase with a margin requirement of 50 percent?

Accepted Answer

A)  $2,000 
B)  $4,000 
C)  $0 
D)  $8,000 
E)  $6,000

Question 18

When the discount rate is increased,

Accepted Answer

A)  there is more money for banks to lend. 
B)  there is an increase in the overall money supply. 
C)  there is increased economic activity. 
D)  there is an economic slowdown. 
E)  the banks will pay less interest to borrow from the Federal Reserve Bank.

Question 19

The five C's of credit do not include

Accepted Answer

A)  collateral. 
B)  character. 
C)  capacity. 
D)  co-signature. 
E)  conditions.

Question 20

Federal Savings Bank of Columbia is a for-profit organization that accepts deposits from all its customers, provides them with services, and makes loans. This is a(n)

Accepted Answer

A)  investment banking firm. 
B)  savings and loan association. 
C)  credit union. 
D)  brokerage firm. 
E)  commercial bank.

Exam 18: Understanding Money, Banking, and Credit

Investment banking firms are organizations that assist individuals in acquiring personal loans, investing in corporate securities, and purchasing bonds.

A certificate of deposit is similar to a savings account except that the bank agrees to pay the depositor a guaranteed interest rate for money left on deposit for a specified period of time.

How do automated teller machines, automated clearinghouses, point-of-sale terminals, and electronic check conversion affect the way people bank and perform financial transactions?

Which of the following statements is false?

The primary function of the Fed is to

Suzanne is considered a member of her financial institution, which provides checking, savings, and other financial services. She is eligible for membership because she is a teacher. This financial institution is a

With a margin requirement of 50 percent,

Which of the following would provide information about the creditworthiness of a business customer?

The standard unit of money must be divisible into smaller units to accommodate small purchases as well as large ones.

Banks must meet certain requirements before they receive a charter, or permission to operate from authorities, because

Describe the banking services provided by insurance companies, pension funds, brokerage firms, finance companies, and investment banking firms.

First State Bank has $50 million in deposits, and the reserve requirement is 10 percent. How much can it lend?

When Lindsey applies for an auto loan, the bank orders a credit report to see if she has any past bankruptcies or a history of making late payments. The bank is concerned about Lindsey's

During periods of high inflation, money loses which essential characteristic?

Name the five Cs of credit management. Why is each important?

When the Fed buys government securities, there is less money in the economy available for investment, purchases, or lending.

If Jamie wanted to purchase Disney stock using borrowed money and had $4,000 of her own money to use, what is the maximum amount of stock she can purchase with a margin requirement of 50 percent?

When the discount rate is increased,

The five C's of credit do not include

Federal Savings Bank of Columbia is a for-profit organization that accepts deposits from all its customers, provides them with services, and makes loans. This is a(n)