The U.S. Banking System 3rd Edition – Test Bank

Complete Test Bank With Answers

 

 

Sample Questions Posted Below

 

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CHAPTER 05—DEPOSITS IN BANKS

1. Most banks offer essentially the same types of accounts.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

2. A transaction account allows transactions to occur at any time and in any number.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

3. Basic checking accounts always pay interest on the balance deposited in the account.

a. True

b. False

ANSWER: False

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

4. Banks may require up to a seven-day notice from a depositor who wants to withdraw money from a time deposit.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

5. You cannot get your money from a certificate of deposit before the maturity date.

a. True

b. False

ANSWER: False

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

6. Principal is the price paid for using money.

a. True

b. False

ANSWER: False

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

7. Compound interest uses the same principal amount every time it is calculated.

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CHAPTER 05—DEPOSITS IN BANKS

a. True

b. False

ANSWER: False

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2

8. Money doesn’t just mean currency, but also checks, ledger transfers, and even credit.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1

9. In the United States, the government plays the greatest role in determining how money is moving.

a. True

b. False

ANSWER: False

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1

10. Banks are free to change governing documents, but they must give customers written notice of changes.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.4.1 – LO: 5.4.1

11. A joint tenancy checking account allows each owner to make deposits and withdrawals independently.

a. True

b. False

ANSWER: True

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

12. The most common form of a transaction account is a

a. savings account.

b. checking account.

c. money market account.

d. certificate of deposit.

ANSWER: b

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

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CHAPTER 05—DEPOSITS IN BANKS

13. What term best describes companies obtaining financing directly from capital markets (without using banks for

financing)?

a. rate chasers

b. interbank transactions

c. Check 21

d. disintermediation of funds

ANSWER: d

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1

14. Which of the following is NOT a time deposit?

a. savings account

b. checking account

c. money market account

d. certificate of deposit

ANSWER: b

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

15. Which of the following accounts are you LEAST likely to encounter at a modern bank?

a. checking account

b. certificate of deposit

c. money market account

d. passbook savings account

ANSWER: d

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

16. Which of the following accounts is the MOST liquid?

a. money market account

b. certificate of deposit

c. checking account

d. savings account

ANSWER: c

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

17. Adding interest to the principal and paying interest on the new total is called paying

a. compound interest.

b. simple interest.

c. semiannual interest.

d. total interest.

ANSWER: a

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CHAPTER 05—DEPOSITS IN BANKS

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2

18. For the purposes of computing interest compounded daily, a year is generally considered to be

a. 336 days.

b. 360 days.

c. 365 days.

d. 366 days.

ANSWER: b

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2

19. Which of the following statements about reserve requirements is true?

a. Reserve requirements apply to the M1 and M2 money supply.

b. Reserve requirements are the most important factor in bank lending.

c. Reserve requirements do not change very often.

d. If reserve requirements are low, banks must keep back more money and therefore have less to lend.

ANSWER: c

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2

20. Which of the following governing documents list interest rates in effect at the time for various types of accounts?

a. disclosure statements

b. account rules

c. fee schedules

d. deposit rate schedules

ANSWER: d

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.4.1 – LO: 5.4.1

21. A check that is dated six months or more before it is presented for payment or deposit is called a(n)

a. stale check.

b. postdated check.

c. bounced check.

d. overdraft check.

ANSWER: a

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2

22. This Federal Reserve regulation requires banks to maintain adequate reserves for the funds they have on deposit.

a. Regulation C

b. Regulation CC

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CHAPTER 05—DEPOSITS IN BANKS

c. Regulation D

d. Regulation DD

ANSWER: c

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2

23. ____________________ checking accounts offer a few simple services for minimal cost.

ANSWER: Basic

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

24. All deposits to cover transactions that make automatic withdrawals or transfers to pay bills without writing checks are

called ____________________ deposits.

ANSWER: checkable

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

25. A(n) ____________________ savings account provides a monthly or quarterly report detailing all account activity.

ANSWER: statement

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

26. A(n) ____________________ savings account provides a ledger of activity that a teller updates when a customer

makes deposits or withdrawals.

ANSWER: passbook

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

27. The date on which a certificate of deposit is paid is called the ____________________ date.

ANSWER: maturity

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

28. A(n) ____________________ certificate is equivalent to a certificate of deposit, except it is offered by a credit union

rather than a bank.

ANSWER: share

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

29. The beginning amount used to calculate interest is called ____________________.

ANSWER: principal

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

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CHAPTER 05—DEPOSITS IN BANKS

30. ____________________ interest adds interest to the principal and pays interest on the new total.

ANSWER: Compound

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2

31. Banks make and receive deposits to each other in ____________________ transactions.

ANSWER: interbank

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.1 – LO: 5.3.1

32. Consumers who perpetually move their funds among various accounts to obtain the highest interest rates at any point

in time are called ___________________.

ANSWER: rate chasers

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.3 – LO: 5.2.3

33. A(n) ____________________ checking account has two or more owners, each of whom has equal and independent

access to it.

ANSWER: joint

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

34. Natasha’s checking account charges a basic monthly fee of $5. It allows her to write ten checks each month for free; it

charges her $2 for every additional check she writes. The account also charges Natasha $1 each time she uses an ATM

machine. What total fees did Natasha pay in April if she wrote 17 checks and used the ATM machine six times?

ANSWER: $25

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

35. Theo wrote 132 checks last year. How many checks did he write every month, on average?

ANSWER: 11

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

36. Calculate the simple interest earned on a savings account in nine months that begins with a deposit of $500 and pays 3

percent interest.

ANSWER: $11.25

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

37. Augie’s savings account pays simple interest. He began with a deposit of $2,000; at the end of one year, he had earned

$80 in interest. Find the interest rate on the account.

ANSWER: 4 percent

POINTS: 1

LEARNING OBJECTIVES: Copyright Cengage Learning. Powered by Cognero. BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

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CHAPTER 05—DEPOSITS IN BANKS

38. Keri’s savings account pays simple interest at a rate of 4.5 percent. After nine months, the account had earned $202.50

in interest. Find the principal.

ANSWER: $6,000

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

39. Calculate the simple interest earned on a savings account in six months that begins with a deposit of $5,000 and pays 6

percent interest.

ANSWER: $150

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

40. What is a demand deposit?

ANSWER: A demand deposit is a deposit account that is payable on demand whenever the depositor

chooses.

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

41. How do the total funds in transaction accounts affect the money supply?

ANSWER: The total funds in transaction accounts affect the money supply because of their high

liquidity.

POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

42. What is a certificate of deposit?

ANSWER: A certificate of deposit is a certificate offered by a bank that guarantees payment of a specified

interest rate until a designated date in the future.

POINTS: 1

LEARNING OBJEC

BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

TIVES:

43. What is the basic formula for calculating simple interest?

The basic formula for calculating simple interest is Principal × Rate × Time.

ANSWER: POINTS: 1

LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.2.1 – LO: 5.2.1

44. In general, what determines the money supply?

ANSWER: POINTS: 1

LEARNING OBJECTIVES: The money supply is determined by the supply and demand for credit.

BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2

45. What are disclosure statements?

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CHAPTER 05—DEPOSITS IN BANKS

ANSWER: Disclosure statements provide bank customers full information about bank policies. They are

required by law.

POINTS: 1

LEARNING OBJECTIV

ES:

BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2

46. Describe the benefits of an express checking account. What are some disadvantages?

ANSWER: Benefits of an express checking account include unlimited check writing, low minimum balance

requirements, and low or no monthly fees. However, such accounts often charge high teller fees.

POINTS: 1

LEARNING OBJE

BNKG.CFFT.3.LO: 5.1.1 – LO: 5.1.1

CTIVES:

47. Compare and contrast savings accounts and money market deposit accounts.

ANSWER: Savings accounts are among the safest places to put money. Liquidity is high, but interest income is

relatively low. A money market deposit account offers a higher rate of interest than a savings account,

but it will typically require a higher initial deposit to open. In addition, minimum balances to avoid fees

are also higher, and liquidity is not as great as with a savings account.

POINTS: 1

LEARNING OBJE

BNKG.CFFT.3.LO: 5.1.2 – LO: 5.1.2

CTIVES:

48. Explain the difference between APR and APY.

ANSWER: APR stands for annual percentage rate; it is the nominal rate on which interest is calculated per year.

APY stands for annual percentage yield; it represents the effect of compounding. APY varies according

to the APR and the frequency of compounding.

POINTS: 1

LEARNING OBJE

BNKG.CFFT.3.LO: 5.2.2 – LO: 5.2.2

CTIVES:

ANSWER: 49. Describe how the Federal Reserve can put more money into the economy through its open market operations.

The Fed buys U.S. government securities on the open market. The Fed buys these securities by creating

new money, which the sellers of the securities deposit in financial institutions. Thus, deposits flow

from the Fed’s pool of new money directly into bank accounts, providing banks more money to lend.

The money supply expands as a result of the multiplier effect.

POINTS: 1

LEARNING OBJE

BNKG.CFFT.3.LO: 5.3.2 – LO: 5.3.2

CTIVES:

50. Name three things a bank must do to meet the requirements of Federal Reserve Regulation CC.

ANSWER: To meet the requirements of Regulation CC, a bank must (1) provide consumers who have transaction

accounts, such as a checking account, with disclosures stating when their funds will be available for

withdrawal; (2) post a notice of the bank’s availability policy pertaining to consumer accounts; and (3)

include a notice of funds availability on the front of all preprinted deposit slips.

POINTS: 1

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LEARNING OBJE

BNKG.CFFT.3.LO: 5.4.2 – LO: 5.4.2

CTIVES:

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