Exam 2 answers
Terms in this set (33)
an example of a depository financial institution is an insurance company
deposits in commercial banks which are members of the FDIC, are insured up to a maximum of $50,000 per account
credit unions are nonprofit depository institutions that serve members who have a common affiliation (such as same employer or same community)
a mutual fund is a means by which investors with only a small amount of money can invest in a portfolio of securities
the act that allows banks to transmit electronic images of checks, thus allowing funds to be transferred immediately is known as
your checkbook balance at the end of may is $1041. when you receive may's bank statement, you discover the following additional items: bank fees, $271; interest earned, $163. your adjusted checkbook balance after considering these times is
allison is a recent college graduate and is looking for a bank in which to open a checking account. she has narrowed her choice to two. first national requires a $100 minimum deposit and charges 15cent per check. city bank requires a $500 minimum deposit, but charges only 5cents per check. both pay the same interest rate on the minimum deposit. allison estimates that she will write 40checks per month. assuming that allison could invest any funds not required for a minimum deposit in a one-year cd paying 6cents, what would be the monthly cost to allison for first nation and city bank? which should she choose?
first nation bank- $6.00; city bank- $4.00
juan has $1000 that he would like to invest in a CD. his bank offers two alternatives, i.e., a one-year cd paying 6% or a two year CD paying 9%. juan has been reading that interest rates are rising and, based on his research, he estimates that by year-end the rate on one-year cds will increase to 10%. what alternative would give juan the most interest and what would the totally interest be?
one two-year CD returning $180 interest
the term structure of interest rates is measured by ___, which shows the interest rate offered at each maturity level.
if a bank provides overdraft protection at a rate of 12% for each $100 (or portion of $100) borrowed when an overdraft occurs, what amount of interest would a customer pay for a $188 overdraft?
you buy a t-bill, which has a par value of $10,000 for $9600 and the T-bill has a one-year maturity. what will be your return?
all of the following are true of treasury securities except they
have a minimum par value of $100
____ risk is the risk that an investment could decline as a result of a change in interest rates.
money market funs (MMFs) offer all of the following except
on april 1, alex deposited $2000 in an MMDA that pays 3% interest. on july 1, alex invested $3000 in a six-month CD that pays 6% interest. how much total interest will alex have earned by dec. 31?
which of the following will NOT help you establish a good credit history
making as many purchases as possible with cash
a credit rating (score) of ____ would normally allow you to have easy approval for credit
which of the following is the lease common manner in which an identity theft victim discovers the crime?
routine examination of a credit report
as of November 14, bed has an outstanding credit card balance of $1100 from purchases made over the past month. the new billing period begins on November 15. assume ben's outstanding balance for the first 15days of this new billing period (nov. 15-29) is $1100. then on november 29, the financial institution receives a payment of $600 from ben, reducing this balance to $500. this is the balance for the remaining 15days. using the average daily balance method and a monthly interest rate of 2.5%, ben's finance charge would be
jill borrowed $6000 and will be charge simple interest rate of 12%. jill will pay ___ interest for borrowing the money on september 1 and repaying the money on december 31
assuming you were charge simple interest on a loan of $4900 which required you to repay in one year $5292, what rate of interest would you be charged?
sandy had a beginning balance on her mastercard statement of $300. this month she had purchases of $400, payments of $300, and a $100 cash advance. to avoid interest charges, sandy must make a payment of
sand cannot avoid interest charges
you are considering applying for one of two credit cards. credit card "a' has an annual fee of $30 and charges interest of 10%. credit card "b" has no annual fee, but charges an interest rate of 15%. if you carry an average balance of $500 on your credit card, the lowest total annual expenses you could have with one of these two credit cards would be
if you buy a $10,000 par value T-bill with a 180-day maturity date for $9750, what will be your return?
in comparing credit cards to other forms of credit, which of the following is false?
credit cards can be viewed as a source of funds.
if you buy a $10,000 par value, three month t-bill prices at $9800, what will your return on investment be?
you have a credit card on which your beginning balance for the month was $400. on the 10th of the month you took out a cash advance of $500. during the month you made purchases of $250. assuming that interest rate on purchases is 15% (1.25% per month), cash advances is 18% (1.5% per month), and there is a 1% fee on all cash advances, what would you have to pay to pay off your account if your due date is the 30th of the month?
if the government borrows funds to finance a military build-up in the middle east, this will cause a
shift in demand for funds
which of the following is not a method by which financial institutions calculate finance charges on credit cards?
ending balance method
john is considering pursuing one of two credit cards. credit card "a" has no annual fee and charges an interest rate of 12.5%. credit card "B" has an annual fee of $45 but charges an interest rate of 9%. it john is likely to have an average credit card balance of $2000, the lowest annual expense john could have with one of these two?
according to bob (our guest speaker), you should always make sure your lender uses
according to bob, which of the following is false
if you had to chose one card to be stolen, you should choose the debit card
according to bob, which of the following is the best financial institution for car loans, credit cards, and demand deposit accounts?