Personal Finance 12th Edition by E. Thomas Garman – Test Bank

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Description Personal Finance 12th Edition by E. Thomas Garman – Test Bank Sample Questions Instant Download With Answers Chapter_3_Financial_Statements_Tools_and_Budgets

1. Financial planning focuses primarily on spending wisely. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s:Understanding

OTHER:

Analytic

NOTES:

financial planning also includes the management of risk and plans for ca 3.1

2. Financial planning begins by acquiring a good job that provides a person with

enough extra income to manage. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s:Understanding

OTHER:

Analytic

NOTES:

financial planning begins by examining values and setting financial 3.1

3. Financial planning is the process of developing and implementing short-term plans to achieve financial objectives. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

financial planning is long-term.

3.1

4. Financial planning is a single, customized plan regarding a person’s financial affairs. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

financial planning involves a series of plans.

3.1

5. Financial planning is only for the rich. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

people of all income and wealth levels benefit from doing financial p 3.1

6. Values have little impact on financial goals. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

personal values are the starting point for setting financial goals.

3.1

7. It is not necessary that your values be consistent with your financial and lifestyle goals. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

financial and lifestyle goals should be consistent with your values

8. Values are fundamental beliefs regarding what consumer goods are worth. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

values are your beliefs about what is important, desirable and worth 3.1

9. The concept of “pay myself first,” saving and investing before you pay other expenses, is a characteristic of successful financial managers.

a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

10. Financial planning begins by examining one’s values. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

11. Your goal in financial planning is to manage your income and wealth in such a way that your goals are met in a suitable manner. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

12. Paying off debts is an example of a financial goal even though it does not involve a direct purchase. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

13. Effective financial goals should be stated explicitly in terms of purpose, dollar amounts, and projected date for achievement. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

14. Among the intermediate-term goals for capital accumulation is having a fund for emergencies. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify your financial values, goals and strategies

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.1

15. Reducing the number of bank and credit accounts that each partner brings into the marriage can save money on account fees. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

16. A balance sheet describes an individual’s financial progress over a period of time, generally a year. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 a balance sheet shows an individual’s financial status on a sp

17. A cash-flow statement summarizes transactions that have taken place over a specific period of time. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

18. Monetary assets include cash and near-cash items that can be readily converted to cash. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.2

19. Tangible assets are assets whose primary purpose is to provide maintenance of a lifestyle. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

20. In general, tangible assets do not depreciate in value over time. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 most tangible assets do depreciate over time.

21. Successful financial planning requires identifying the one best investment asset for an individual, then putting all of an individual’s surplus into that asset. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

successful financial planning involves using several investment assets.

3.2

22. Both individual retirement accounts (IRAs) and non-residential real estate property are investment assets. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.2

23. The balance sheet serves as an assessment of assets and liabilities at fair market value as of a specified date. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

24. For most people, the only way to increase net worth is to spend less than their income; people must save and invest. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

25. A balance sheet shows flows of income in and expenses out of your finances for a given period of time. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 the balance sheet shows the value of your assets and liabiliti

26. Short-term liabilities are obligations to be paid off within one year. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

27. The liability section of a balance sheet would include money owed to a doctor or a lawyer but would not include money owed to a friend. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 all monies owed are included

28. A person who has a negative net worth is technically insolvent. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

29. A cash-flow statement for a previous year would show whether you were able to live within your income. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

30. A cash-flow statement shows flows of income in and expenses out of your finances for a given period of time. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

31. A cash-flow statement shows the value of your assets and liabilities as of a specific date. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your fin

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 the cash-flow statement shows flows of income in and expenses o

32. Keeping track of all income and expenses is very important to achieving your financial objectives. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

33. Savings set aside can be categorized as both fixed and variable expenses. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

34. It is usually easy to reduce a fixed expense. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

fixed expenses are difficult to reduce.

3.2

35. The surplus section on an individual’s cash-flow statement is similar to net profit for a business. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

36. Most people keep track of their finances on a cash basis rather than on an accrual basis. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

37. A surplus demonstrates that you are managing your financial resources successfully and do not have to use savings or borrow to make financial ends meet. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

38. Financial ratios are numerical calculations that make assessments of financial conditions more complex. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 financial ratios simplify the process of assessing your financia

39. Many experts recommend that people should have assets equal to one year’s expenses in emergency cash reserves. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial healt

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

financial experts tend to recommend a three-month emergency fund althoug 3.2

40. The liquidity ratio reveals how many months it would take to convert all assets into cash. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

this ratio relates only to monetary assets and how long they would last s 3.2

41. You can use the liquidity ratio to determine the number of months that you could continue to meet your expenses using only your monetary assets should all income cease. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

42. A family with two income earners will always need a greater amount of cash reserves than a family with one earner. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial healt

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

the need for cash reserves relates to the amount of income and not whether 3.2

43. By analyzing financial statements, a person can assess his or her financial condition and progress. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure yo

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

44. Households dependent on the income from a self-employed person may need a larger emergency cash reserve than others. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

45. The asset-to-debt ratio compares total assets with total liabilities and is a broad measure of a household’s financial liquidity. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.2

46. A person is insolvent when he or she doesn’t have enough current income to pay all of his or her current bills. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2 insolvent refers to not having enough assets to cover your liabilities—a n

47. A low asset-to-debt ratio is a positive indicator of financial well-being. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

a high asset-to-debt ratio is desirable.

3.2

48. The debt-to-income ratio provides a view of total debt burden of an individual or family by comparing the dollars spent on gross annual debt repayments with gross annual income. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

49. A debt-to-income ratio of 0.36 or less is considered manageable for most families. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.2

50. A debt-to-income ratio of 0.36 or less indicates that disposable income is adequate to make debt repayments. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

a ratio of 0.36 or less indicates that gross income is adequate to make de 3.2

51. The debt payments-to-disposable-income ratio is gross income divided by monthly nonmortgage debt repayments. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

the ratio is monthly nonmortgage debt payments divided by monthly dis 3.2

52. The investment assets-to-total assets ratio compares the value of your investment assets with your total assets. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Use balance sheets and cash-flow statements to measure your financial

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.2

53. Keeping good records is a prerequisite for effective financial planning. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Collect and organize the financial records necessary for managing your

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.3

54. Original deeds and mortgage papers should be stored in one’s home file. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Collect and organize the financial records necessary for managing your

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

such records are best kept in a safe-deposit box.

3.3

55. Safe-deposit boxes take two keys to open, and the financial institution where the box is located keeps one of these keys. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Collect and organize the financial records necessary for managing your

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.3

56. Specific financial goals drive the creation of budgets. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

57. The major purpose of budgeting is to reach your financial goals. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

58. The major purpose of budgeting is to make sure bills get paid. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

the major purpose of budgeting is to reach financial goals.

3.4

59. Budgeting is narrower in scope than overall financial planning as it is primarily concerned with projecting future income and expenditures over a period of time. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

60. Disposable personal income is the amount of take-home pay remaining after all deductions are withheld for taxes, insurance, and union dues. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

61. Budgeting gives one control over his or her finances. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

62. Once budget estimates are determined; one should not make any changes in the budget for at least one year. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

budget estimates should be revised as needed to reflect reality.

3.4

63. When setting up your budget for the month, it is useful to use prior months’ cashflow statements to set your estimates for income and spending for the upcoming month. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

64. Budget estimates are the projected dollar amounts in a budget that one plans to receive or spend during the period covered by the budget. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

65. To make realistic estimates of income and expenses, reliable financial information is critical. The more accurate the estimates, the more effective the budget. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through bu

NATIONAL STANDARDS:

United States – FN_3 – Reporting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

66. Discretionary income is the money left over once the necessities of living are covered. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

67. Discretionary income is the money people use to pay for the necessities of life. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

discretionary income is the money left over once the necessities of livin 3.4

68. Reconciling budget estimates includes reconciling conflicting needs and wants. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

69. The best method to control overspending is to regularly monitor unexpended balances in each budget classification. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

70. A budget variance is the difference between one’s actual expenditure with budgeted amount for a specific category. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

71. A net surplus in your monthly budget cannot be carried forward to the next month. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

a net surplus can be carried forward so that irregular expenses can be 3.4

72. When a college student saves all summer so that he or she has money available to live on during the school year; he or she is using a revolving savings fund. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

73. After the budgeting period has ended, you need to add up the actual income received and expenditures made during that period. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

3.4

74. Using credit cards to “balance” your budget is a proper budgeting tool. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

uses of credit cards are expenditures and not income.

3.4

75. A budget variance is the difference between the amount budgeted and the actual amount spent or received.

a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

76. When budgeting, recordkeeping is the process of recording the sources and amount of dollars earned and spent. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Achieve your financial goals through budgeting

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

3.4

Chapter_5_Managing_Checking_and_Savings_Accounts

1. The goal of monetary asset management is to maximize interest earnings and minimizing fees while keeping funds safe and readily available. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1

2. In monetary asset management, safety means the speed and ease with which an asset can be converted to cash. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1 safety is freedom from financial risk.

3. Monetary asset management includes setting money aside in a savings account for use later when making investments. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1

4. Cash management focuses primarily on your investment assets. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1 cash management focuses on monetary assets.

5. Liquidity is the speed and ease with which an asset can be converted to cash. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

6. Unlike other providers of financial services, depository institutions can both take deposits and make loans to consumers. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1

7. Today, even stock brokerages and insurance companies provide certain products for use in cash management. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1

8. Credit unions typically offer the widest variety of financial services. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1 commercial banks offer the widest variety.

9. Commercial banks typically offer the widest variety of financial services. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

10. The primary focus of savings banks is to accept savings from consumers and provide mortgage and consumer loans. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1

11. Deposits in credit unions with federal charters are insured through the National Credit Union Share Insurance Fund (NCUSIF). a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

12. Mutual savings banks are called “mutual” because the depositors own the institution and share in the earnings. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

13. Credit unions with federal charters have their accounts insured through the FDIC.

a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1 they are insured through the National Credit Union Share Insurance Fun

14. The total protection an individual might have with any institution, including all its branches, is $250,000 with no more than $125,000 each on single-ownership and joint accounts. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1 the total protection can be $500,000$250,000 each on individual and j

15. A mutual fund is an investment company that raises money by selling shares to the public and then invests that money in a diversified portfolio of investments. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

16. One can increase the amount of money covered by FDIC insurance by dividing his or her money among different branch offices of the same depository institution. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sou

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.1 you must spread funds across several institutions in order to e

17. Money deposited in mutual funds is insured by the federal government. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of suc

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1 the federal deposit insurance programs only cover funds in accounts at de

18. A stock brokerage firm is a licensed financial institution that specializes in selling and buying stocks, bonds, and other investment alternatives. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

19. Stock brokerage firms are federally insured institutions. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1 the federal deposit insurance programs only cover depository institutio

20. Stock brokerage firms earn commissions on clients’ stock transactions.

a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Identify the goals of monetary asset management and the sources of s

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.1

21. Checks allow you to transfer funds from your account to other people and organizations. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

22. The only reason to have a checking account is so that one has an account for writing checks. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 checking accounts can earn interest.

23. When you use a debit card, funds are instantaneously removed from your account. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

24. Checking accounts that pay no interest are called NOW accounts. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 they are called demand-deposit accounts.

25. The interest rate you earn on your checking and savings account can vary with the amount you have in the accounts. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

26. Interest-earning checking accounts are offered through savings banks and mutual savings banks as well as credit unions. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

27. A share draft account is the credit union version of a NOW account. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

28. Share draft accounts at credit unions are generally more expensive than NOW accounts at commercial banks. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 credit unions generally charge the lowest fees of all depository institutions.

29. Costs for a share draft account are often higher than for those for a checking account at a bank or savings bank. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

30. NOW accounts get their name because they are considered demand deposits. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 NOW stands for negotiable order of withdrawal and is the type of checking ac

31. College students who are independent of their parents may qualify for very lowcost lifeline banking accounts. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

32. NOW accounts and share draft accounts with tiered interest will pay higher interest rates on larger balances. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

33. Acceptance for a lifeline banking account is dependent on one’s income and net worth. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

34. A stop-payment order works only if the check has not yet cleared your financial institution. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

35. A written stop-payment order is valid for up to three years. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 such orders expire after six months unless renewed.

36. Traveler’s check companies guarantee replacement of lost checks if their serial

numbers are identified. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

37. Fees of no more $10 are generally charged for money orders, certified checks and cashier’s checks. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 fees are based on the amount on the instrument and can be much higher.

38. If your checking account balance drops to less than perhaps $50 at any point during a month you would likely be better off with a minimum deposit account in order to avoid fees. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 an average-balance account would be better in this situation as your average

39. You can save on fees for a checking account by having your paycheck directly deposited into your account electronically by your employer. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

40. Banks offering a “free” checking account means that there are no fees for writing bad checks or using another bank’s ATM. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 “free” only relates to the assessment of monthly service charges.

41. Funds on deposit in a savings account are considered time deposits rather than demand deposits. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

42. Funds on deposit in a savings account are considered demand deposits. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 they are considered time deposits.

43. Time deposits are savings that are expected to remain on deposit in a financial institution for an extended period. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

44. Demand deposits are savings that are expected to remain on deposit in a financial institution for an extended period. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 time deposits are expected to remain on deposit for an extended period of tim

45. Institutions usually have a rule requiring that savings account holders give 30 to 60 days notice for withdrawals, although this restriction is seldom enforced. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

46. Time deposits specify a period that the savings must be left on deposit, such as six months or three years. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 only fixed-time deposits such as CDs have this requirement.

47. Fixed-time deposits specify a period of time that the savings must be left on deposit. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

48. Institutions have a rule requiring that savings account holders give 30 to 60 days’ notice for withdrawals. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

49. A long-term, fixed-rate certificate of deposit would be most appropriate when interest rates are moving up. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Applying

OTHER:

Analytic

NOTES:

5.2 fixed-rates in a market where rates are rising result in locking-in the lower ini

50. In general, the shorter the maturity time on a certificate of deposit, the higher the rate of interest that will be paid. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 the opposite is true as long-term CDs have higher rates.

51. If one believes interests rates will move lower in the months ahead, he or she should invest in long-term, fixed-rate savings investments. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Applying

OTHER:

Analytic

NOTES:

5.2

52. It is highly recommended that CD investments be made at local institutions, even though some yield may be sacrificed. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 there is no need to have a local institution for CDs as you will not have acces

53. The interest rate in force when a CD is purchased typically remains fixed for the entire term of the deposit. a.

True

b.

False

ANSWER:

True

POINTS:

1

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

54. Interest rates on longer-term CDs are usually higher than the comparable rates on shorter-term instruments. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

55. Bump-up CDs allow savers to bump up the interest rate once to a higher market rate. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

56. Money withdrawn from a CD before the end of the specified time period is subject to interest penalties. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

57. While the majority of certificates of deposit pay a fixed rate of interest, variable-

rate certificates of deposit are available. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

58. It is possible to lose money on a certificate of deposit if the early withdrawal penalty is greater than the interest earned. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

59. CD laddering is a technique that smoothes out the fluctuations in interest rates and lowers inflation rate risk. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

60. The safest type of endorsement on a check is a blank endorsement. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 the safest type of endorsement is a restrictive endorsementblank endorseme

61. Checks mailed to the bank for deposit should always be endorsed with a restrictive endorsement. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

62. A check with a blank endorsement contains only the payee’s signature on the back. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

63. Writing a “bad check” can be very expensive because of fees assessed by both the bank and the payee. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

64. If you have an automatic overdraft loan agreement with your bank, money will be borrowed from your MasterCard or Visa as a cash advance when you write a bad check.

a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

65. An automatic funds transfer agreement is usually the most expensive way to avoid bad check fees. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

courtesy overdraft/bounce protection can be the most expensive.

66. Courtesy overdraft/bounce protection can be very helpful if the institution will honor your debit card even if you have insufficient funds. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the goa

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2 if the institution honors your card you may have to pay a fee for every single ove

67. Periodically, you should conduct an account reconciliation in which you compare your records with your bank’s records. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to

NATIONAL STANDARDS:

United States – BB_3 – Critical Thinking

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

68. A person whose income is dependent on commissions generally needs more readily available emergency fund than a salaried employee. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

69. The more frequent the compounding, the greater the effective return for the saver. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Understanding

OTHER:

Analytic

NOTES:

5.2

70. One should accumulate enough savings to cover living expenses for six to nine months. a.

True

b.

False

ANSWER:

False

POINTS:

1

DIFFICULTY:

Moderate

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2 experts recommend an emergency fund of from three to six months of expen

71. Brokered certificates of deposit are available through stockbrokers. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2

72. A grace period is the time period in days during which deposits or withdrawals can be made and still earn the same interest as other savings from a given day of the interest period. a.

True

b.

False

ANSWER:

True

POINTS:

1

DIFFICULTY:

Easy

REFERENCES:

Understand and employ the various types of accounts available to meet the g

KEYWORDS:

Bloom’s: Remembering

OTHER:

Analytic

NOTES:

5.2