Banking And Money Management
When a person puts their money in a bank they may find themselves using more than they can and some banking institutions offer their clients free money management advice. The quiz below tests your understanding on banking and money management. Give it a try and get ready to broaden your knowledge.
- 1.The best choice for someone who makes occasional spur-of-the-moment purchases is
- A.
A money market mutual fund
- B.
A passbook savings account
- C.
A certificate of deposit
- D.
A US Series HH bond
- 2.Which of the following is not a primary reason why many people hold cash?
- A.
To undertake transactions
- B.
To avoid credit
- C.
To have an emergency reserve
- D.
To have a store of value
- 3.Many financial planners recommend that you hold emergency reserve assets equal to ________ months of after-tax income.
- A.
3-6
- B.
5-7
- C.
7-12
- D.
12-15
- 4.Which of the following assets is most liquid?
- A.
A checking account
- B.
A savings account
- C.
A certificate of deposit
- D.
The above three are equally liquid.
- 5.Federal deposit insurance
- A.
Protects each deposit account up to $100,000.
- B.
Protects each depositor up to $100,000.
- C.
Protects both the deposit and depositor up to $1,000,000.
- D.
Is available only by depositor choice and then a small fee must be paid
- 6.From a safety perspective, which alternative below offers the best advice
- A.
Make sure an account is federally insured.
- B.
Make sure an account is state insured.
- C.
Avoid any institution that is not a commercial bank
- D.
Avoid using out-of-state institutions.
- 7.Which of the following is not a characteristic of most passbook savings accounts?
- A.
An unlimited number of deposits or withdrawals each month
- B.
No minimum balance requirement
- C.
Interest rates are higher than money market rates.
- D.
Interest rates are higher than money market rates.
- 8.Money market mutual funds are best described as institutions that
- A.
Invest only in MMDAs.
- B.
Pool resources of many investors to purchase liquid and high-yielding securities.
- C.
Issued by the Treasury, commercial banks, and other corporations.
- D.
Are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets
- 9.Which of the following is not a characteristic of certificate of deposit (CDs)?
- A.
You pay a penalty for early redemption.
- B.
You "lock in" (are guaranteed) the stated interest if you hold the CD until maturity.
- C.
They are preferred over money market deposits if you expect interest rates to fall
- D.
They have a minimum maturity of three years.
- 10.Depositors often cite ________ as the most important consideration in selecting a particular bank.
- A.
Safety
- B.
Low charges
- C.
Size
- D.
Geographical convenience
- 11.Monica Basidtes received a check and endorsed it by simply signing her name on the reverse e of the check. This is called
- A.
A special endorsement
- B.
A deposit endorsement.
- C.
A restrictive endorsement.
- D.
A blank endorsement.
- 12.John issued a check to Mary who signed it as a blank endorsement. Mary lost the check. If someone finds it, he/she could
- A.
Sign his/her name under Monica's and cash the check.
- B.
Write "for deposit only" under Monica's signature and deposit it to his/her account.
- C.
Do nothing; the check must be made payable to him/her before it can be cashed.
- D.
Do nothing; since he or she is neither a payer or payee.
- 13.Which of the following statements is true concerning overdrafts?
- A.
An effective way to prevent them is to "overload" the account.
- B.
They can be avoided by arranging an automatic transfer from a savings account.
- C.
They are inexpensive nuisances because banks usually do not charge for overdrafts.
- D.
They differ from "bounced checks" in that "bouncing" a check is a mistake while an overdraft is deliberate.
- 14.The least effective method of protecting against overdrafts generally is to
- A.
Maintain a larger-than-normal account balance. to cover the overdraft.
- B.
Arrange for automatic transfers from a savings account.
- C.
Rrange for a credit-card loan effective method of protecting against overdrafts generally is to
- D.
Ignore them since banks do not charge for overdrafts.
- 15.Lenny, who lives in New York City, deposited in his checking account a check from his mother, who also lives in New York City. The bank should make the funds available
- A.
Immediately
- B.
) on the next business day.
- C.
Two to three days after the deposit day
- D.
After the check clears the Federal Reserve System.
- 16.If you discover that someone has stolen your checks, you should
- A.
Issue an immediate stop payment for each check.
- B.
Purchase account insurance to avoid potential losses.
- C.
Inform the bank and open a new account.
- D.
Do nothing.
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