FINC 300 Final Exam || with 100% Verified Solutions.
After reading the new account insert in his monthly statement, Tony Mercadante determined that
the FDIC considers a joint account as a separate depositor. He and his wife, Cynthia, have three
accounts at ABC Bank & Trust, one joint account with a balance of $60,000 and two individual
account - his has a $150,000 balance, and hers has a $254,000 balance. What amount of FDIC
coverage do Tony and Cynthia have on their accounts? correct answers Tony's account balance
of $150,000 is completely covered as is their joint account of $60,000; both accounts are under
the $250,000 FDIC limit. Cynthia's account is over the insurance limit by $4,000, but their
money would be covered if she moved some into their joint account or into another institution.
Two advantages of carrying cash are that it's easy to spend and many times you can even recall
where you spent it correct answers False
Because liquid assets can be turned into cash quickly and with little loss, they have little risk
associated with them and therefore provide a low rate of return for the consumer correct answers
True
Keeping your funds in liquid assets is riskier than keeping them in illiquid assets and therefore
investors require a higher expected rate of return on liquid assets correct answers False
Cash and investments that can be easily converted into cash are termed correct answers Liquid
assets
According to the Keown book, one way to think of liquid assets is as a(n) correct answers
Reservoir, with money moving in as wages are received and moving out as living expenses are
paid
It is best for college students to wait and begin saving once they are "making more money"
correct answers False
It is wise to wait until you are earning a substantial amount of money before you establish a
disciplined financial plan for your future correct answers False
With online banking, you are able to access your accounts and conduct business transactions
through the Internet, your mobile phone, and devices correct answers True
The deregulation of the 1980s has allowed brokerage firms to offer traditional banking services,
and has also let banks offer services formerly found only at investment companies correct
answers True
Credit unions and internet - only banks typically offer more attractive interest rates to both
borrowers and savers correct answers True
What is the name of an investment company that raises funds from investors, pools the money,
and invests in stocks or bonds? correct answers Mutual fund firm
,Which of the following financial institutions were originally established to provide mortgage
loans to depositors? correct answers Savings and loan associations
Credit unions and internet - only banks typically offer correct answers More attractive interest
rates to both borrowers and savers
Online and mobile banking allows you to do the following correct answers Access your accounts
at any time of day; pay bills and receive payments online; transfer funds between accounts
T-bills are extremely sage investments, having been issued by the federal government correct
answers True
One of the advantages of T-bills is that they are exempt from federal taxes but subject to state
income taxes correct answers False
What is the name for comprehensive financial services packages offered by brokerage firms?
correct answers Asset management accounts
A savings alternative that pays a fixed rate of interest while keeping your funds on deposit for a
contracted period of time that can range from 30 days to several years is called a correct answers
Certificate of deposit
Which of the following is not an advantage of a CD as a cash management alternative? correct
answers CDs offer liquidity
Money Market Deposit Accounts enjoy one advantage over savings accounts found in
commercial banks. This advantage is correct answers A variable rate that is generally higher
Money market mutual funds provide attractive competition for bank deposits becuase correct
answers Their short term, higher returns are generally regarded as practically risk-free
Another name for an interest bearing checking account is a(n) correct answers NOW account
All of the following are advantages of CDs except correct answers Minimum deposit required
A disadvantage of an MMMF is correct answers Administrative fees
A tax free investment will always have a higher after-tax return than a taxable investment correct
answers False
The National Credit Union Association is a federal agency that insures deposits at credit unions
correct answers True
The APY can never be the same as the APR correct answers False
,The ____________ converts interest rates compounded for different periods into comparable
annual rates, allowing you to compare interest rates easily correct answers APY
What is the FDIC? correct answers Federal Deposit Insurance Corporation
Why is it important to convert interest rates into the APY on different accounts and with
different banks? correct answers The same advertised rate will vary with different compounding
periods
Your bank may offer a line of credit, a credit card, or a link to your savings account to cover
transactions when you overdraw your account correct answers True
If you only use your debit card and ATM card and rarely write paper checks, overdraft protection
is still a good thing to have correct answers True
Overdraft protection is an automatic loan made to your checking account whenever your account
does not contain enough cash to cover the checks that you have written against it correct answers
True
When you use your debit card or ATM card, you should enter the transaction into your check
register correct answers True
With online banking and EFT, many people don't really need checks anymore. If you seldom
need a paper check for transactions, what option is available to you that may be cheaper than
maintaining a checking account? correct answers Cashiers checks; money orders
What is the name for an automatic loan made to your checking account whenever your account
does not contain enough cash to cover the checks that you have written against it? correct
answers Overdraft protection
Four banking conveniences are listed below. Which one is not typical? correct answers Safety
deposit boxes; online banking services; direct deposit; overdraft protection
Which of the following is not a consideration in determining cost of a financial institution?
correct answers Location
A debit card is the same thing as a smart card correct answers False
A debit card, also known as as memory card, can hold ID information, insurance information,
and medical history correct answers False
A store-valued card, only used at one store for one purpose, is known as an "open-loop" card
correct answers False
Electronic funds transfer applies to which of the following? correct answers Debit cards; direct
deposit; smart cards; ATM
, Your bank, First Bank, charges you $1.50 every time you use an ATM that is not owned by
them. Unfortunately, there is no First Bank ATM near your school. There is a Second Bank
ATM in the Student Center, which you use several times a week to withdraw $10 at a time for
lunch, video games, etc. What is the best piece of advice regarding these transactions? correct
answers Avoid them since you are effectively paying 15% interest to access your cash
Christopher just received his checking account statement from his bank. He has a NOW account
with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance.
His statement shows that he currently has a balance of $3,950. In looking at his statement he
notices that his car payment check for $400 is still outstanding, and that his recently received
payroll deposit of $3,600 had not posted at the time the statement was created. His normal living
expenses average $1,500 per month including his car payment. Other than his car loan, he rarely
writes any checks as he prefers to use his debit card and ATM card for day-to-day living
expenses. He pays his credit card balance in full every month. Other than his checking account
he does not own any investments. He has always dreamed of owning a house, and would like to
buy one within the next five years. He has access to a 401(k) pension plan at work wh correct
answers He is not maximizing his return on his liquid assets
Christopher just received his checking account statement from his bank. He has a NOW account
with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance.
His statement shows that he currently has a balance of $3,950. In looking at his statement he
notices that his car payment check for $400 is still outstanding, and that his recently received
payroll deposit of $3,600 had not posted at the time the statement was created. His normal living
expenses average $1,500 per month including his car payment. Other than his car loan, he rarely
writes any checks as he prefers to use his debit card and ATM card for day-to-day living
expenses. He pays his credit card balance in full every month. Other than his checking account
he does not own any investments. He has always dreamed of owning a house, and would like to
buy one within the next five years. He has access to a 401(k) pension plan at work wh correct
answers He should increase his 401(k) contributions to 6% of his salary
Christopher just received his checking account statement from his bank. He has a NOW account
with free checking that pays 0.75% APR on the balance and requires a $500 minimum balance.
His statement shows that he currently has a balance of $3,950. In looking at his statement he
notices that his car payment check for $400 is still outstanding, and that his recently received
payroll deposit of $3,600 had not posted at the time the statement was created. His normal living
expenses average $1,500 per month including his car payment. Other than his car loan, he rarely
writes any checks as he prefers to use his debit card and ATM card for day-to-day living
expenses. He pays his credit card balance in full every month. Other than his checking account
he does not own any investments. He has always dreamed of owning a house, and would like to
buy one within the next five years. He has access to a 401(k) pension plan at work wh correct
answers You need to develop a savings plan; You need to estimate what down payment would be
The Johnson family is very conservative financially. They have a retirement plan where John
works and share a joint checking account at their bank. They keep a lot of money in their
checking account to cover short-term needs and emergencies. Both of them want to step up to
