Personal Finance Chapter 10 - Savings - Quiz, Flashcards & Trivia

1. You may be charged a service fee if you make more than a maximum number of withdrawals from your regular savings account in one month or if your balance falls below a certain minimum.

True

False

The statement suggests that there are conditions under which a service fee may be charged for withdrawals from a regular savings account. These conditions include making more than a maximum number of withdrawals in a month or having a balance below a certain minimum. Therefore, the answer "True" indicates that the statement is correct.

Explanation

The statement suggests that there are conditions under which a service fee may be charged for withdrawals from a regular savings account. These conditions include making more than a maximum number of withdrawals in a month or having a balance below a certain minimum. Therefore, the answer "True" indicates that the statement is correct.

2. A certificate of deposit earns a fixed interest rate for a specified length of time.

True

False

A certificate of deposit (CD) is a financial product that typically earns a fixed interest rate for a specified period, usually ranging from a few months to several years. This means that the interest rate remains constant throughout the duration of the CD, regardless of any fluctuations in the market. CD's are considered to be a low-risk investment option as they provide a guaranteed return on investment. Therefore, the statement "A certificate of deposit earns a fixed interest rate for a specified length of time" is true.

Explanation

A certificate of deposit (CD) is a financial product that typically earns a fixed interest rate for a specified period, usually ranging from a few months to several years. This means that the interest rate remains constant throughout the duration of the CD, regardless of any fluctuations in the market. CD's are considered to be a low-risk investment option as they provide a guaranteed return on investment. Therefore, the statement "A certificate of deposit earns a fixed interest rate for a specified length of time" is true.

3. A stockbroker works for which type of financial institution?

Savings and Loan

Savings Bank

Brokerage Firm

Commercial Bank

A stockbroker works for a brokerage firm because their main job is to buy and sell stocks, bonds, and other securities on behalf of clients. Brokerage firms specialize in facilitating transactions in the financial markets and provide services such as investment advice, research, and trading platforms. They act as intermediaries between buyers and sellers, executing trades and helping clients navigate the complexities of the stock market.

Explanation

A stockbroker works for a brokerage firm because their main job is to buy and sell stocks, bonds, and other securities on behalf of clients. Brokerage firms specialize in facilitating transactions in the financial markets and provide services such as investment advice, research, and trading platforms. They act as intermediaries between buyers and sellers, executing trades and helping clients navigate the complexities of the stock market.

4. Credit unions do not provide insurance for their depositors' savings.

True

False

Credit unions do provide insurance for their depositors' savings. This insurance is typically provided by the National Credit Union Administration (NCUA) in the United States. The NCUA offers deposit insurance coverage up to $250,000 per individual depositor, ensuring that if a credit union fails, depositors' savings are protected. Therefore, the statement that credit unions do not provide insurance for their depositors' savings is false.

Explanation

Credit unions do provide insurance for their depositors' savings. This insurance is typically provided by the National Credit Union Administration (NCUA) in the United States. The NCUA offers deposit insurance coverage up to $250,000 per individual depositor, ensuring that if a credit union fails, depositors' savings are protected. Therefore, the statement that credit unions do not provide insurance for their depositors' savings is false.

5. The date on which a CD is due is called the

Beginning date

Maturity Date

Redemption Date

Ending Date

The date on which a CD is due refers to the maturity date. This is the date when the CD reaches its full term and the investor can redeem or withdraw their funds. It signifies the end of the CD's term and the investor's ability to access the principal amount along with any accrued interest. The maturity date is an important factor for investors to consider when planning their financial goals and determining the appropriate time to invest in a CD.

Explanation

The date on which a CD is due refers to the maturity date. This is the date when the CD reaches its full term and the investor can redeem or withdraw their funds. It signifies the end of the CD's term and the investor's ability to access the principal amount along with any accrued interest. The maturity date is an important factor for investors to consider when planning their financial goals and determining the appropriate time to invest in a CD.

6. Which of the following is not a short-term need?

Unemployment

Weekend Trip

Retirement

Automobile Repair

Retirement is not a short-term need because it refers to the period of life when a person stops working and typically relies on savings, pension, or other sources of income. It is a long-term financial goal that requires planning and saving over many years. On the other hand, unemployment, weekend trips, and automobile repair are short-term needs or expenses that can be addressed or fulfilled in the near future.

Explanation

Retirement is not a short-term need because it refers to the period of life when a person stops working and typically relies on savings, pension, or other sources of income. It is a long-term financial goal that requires planning and saving over many years. On the other hand, unemployment, weekend trips, and automobile repair are short-term needs or expenses that can be addressed or fulfilled in the near future.

7. You will receive the greatest gain on your principal if interest is compounded

Quarterly

Daily

Monthly

Annually

The correct answer is "Daily" because compounding interest daily means that interest is added to the principal every day, allowing for more frequent growth and accumulation of interest. This results in the greatest gain on the principal compared to quarterly, monthly, or annual compounding, where interest is added less frequently.

Explanation

The correct answer is "Daily" because compounding interest daily means that interest is added to the principal every day, allowing for more frequent growth and accumulation of interest. This results in the greatest gain on the principal compared to quarterly, monthly, or annual compounding, where interest is added less frequently.

8. Money market accounts are subject to early withdrawal penalties

True

False

Money market accounts are not subject to early withdrawal penalties. Money market accounts are a type of savings account that typically offer higher interest rates than regular savings accounts. While there may be limitations on the number of withdrawals or transfers you can make from a money market account per month, there are generally no penalties for early withdrawals. However, it is always important to check the specific terms and conditions of the account before making any withdrawals.

Explanation

Money market accounts are not subject to early withdrawal penalties. Money market accounts are a type of savings account that typically offer higher interest rates than regular savings accounts. While there may be limitations on the number of withdrawals or transfers you can make from a money market account per month, there are generally no penalties for early withdrawals. However, it is always important to check the specific terms and conditions of the account before making any withdrawals.

9. A savings account at a credit union is called

Money Market Account

Savings Club

Share Account

CD

A savings account at a credit union is called a Share Account because credit unions operate on a cooperative basis where members are also owners. When individuals deposit money into a credit union, they become shareholders and have a share in the ownership of the credit union. Therefore, the term "Share Account" is used to describe a savings account at a credit union.

Explanation

A savings account at a credit union is called a Share Account because credit unions operate on a cooperative basis where members are also owners. When individuals deposit money into a credit union, they become shareholders and have a share in the ownership of the credit union. Therefore, the term "Share Account" is used to describe a savings account at a credit union.

10. Mutual savings banks are common throughout the U.S.

True

False

The statement is false because mutual savings banks are not common throughout the U.S. While mutual savings banks do exist in the U.S., they are not as prevalent as other types of financial institutions such as commercial banks or credit unions. Mutual savings banks are typically found in specific regions or states rather than being widespread across the entire country.

Explanation

The statement is false because mutual savings banks are not common throughout the U.S. While mutual savings banks do exist in the U.S., they are not as prevalent as other types of financial institutions such as commercial banks or credit unions. Mutual savings banks are typically found in specific regions or states rather than being widespread across the entire country.