Banking And Money Management Quiz! Trivia
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Do you know anything about banking and money management? Do you think you could pass this quiz? Banks have a function called cash management. Money management is a user- friendly, budgeting application that highlights your finances. It categorizes your transactions, helps you to create budgets, view spending, trends, and manage your debts. Take this quiz and uncover if you know your stuff when it comes to banking and money management.'
- 1.
The best choice for someone who makes occasional spur-of-the-moment purchases is
- A.
A money market mutual fund
- B.
A passbook savings account
- C.
A certificate of deposit
- D.
A US Series HH bond
Correct Answer
A. A money market mutual fundExplanation
A money market mutual fund is the best choice for someone who makes occasional spur-of-the-moment purchases because it offers a higher level of liquidity compared to the other options. Money market mutual funds invest in short-term, low-risk securities, making them easily accessible for withdrawals. They provide a combination of stability and flexibility, allowing individuals to quickly access their funds when needed. In contrast, a passbook savings account, certificate of deposit, and US Series HH bond may have restrictions or penalties for early withdrawals, making them less suitable for spur-of-the-moment purchases.Rate this question:
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- 2.
Which of the following is not a primary reason why many people hold cash?
- A.
To undertake transactions
- B.
To avoid credit
- C.
To have an emergency reserve
- D.
To have a store of value
Correct Answer
B. To avoid creditExplanation
Many people hold cash to avoid credit because using cash eliminates the need to borrow money or rely on credit cards. By using cash, individuals can avoid incurring debt and the associated interest charges. Cash provides a tangible and immediate means of payment, allowing individuals to have more control over their finances and avoid the potential pitfalls of credit.Rate this question:
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- 3.
Many financial planners recommend that you hold emergency reserve assets equal to ________ months of after-tax income.
- A.
3-6
- B.
5-7
- C.
7-12
- D.
12-15
Correct Answer
A. 3-6Explanation
Financial planners recommend that individuals hold emergency reserve assets equal to 3-6 months of after-tax income. This range allows for enough funds to cover unexpected expenses or loss of income without having to rely on credit or take on debt. It provides a cushion for emergencies such as medical expenses, car repairs, or job loss, ensuring financial stability during difficult times.Rate this question:
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- 4.
Which of the following assets is most liquid?
- A.
A checking account
- B.
A savings account
- C.
A certificate of deposit
- D.
The above three are equally liquid.
Correct Answer
A. A checking accountExplanation
A checking account is the most liquid asset among the options provided. This is because funds in a checking account are readily accessible for immediate use through various means such as checks, debit cards, and online transfers. On the other hand, a savings account may have some restrictions on withdrawals, such as minimum balance requirements or limited number of transactions per month. A certificate of deposit (CD) has a fixed term and typically imposes penalties for early withdrawal, making it less liquid than a checking account. Therefore, a checking account offers the highest level of liquidity compared to the other options.Rate this question:
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- 5.
Federal deposit insurance
- A.
Protects each deposit account up to $100,000.
- B.
Protects each depositor up to $100,000.
- C.
Protects both the deposit and depositor up to $1,000,000.
- D.
Is available only by depositor choice and then a small fee must be paid
Correct Answer
B. Protects each depositor up to $100,000.Explanation
Federal deposit insurance protects each depositor up to $100,000. This means that if a bank fails or goes bankrupt, the depositor will be reimbursed for their deposits up to $100,000. This insurance provides a safety net for individuals and helps to maintain confidence in the banking system. It is important for depositors to be aware of this protection and ensure that their deposits are within the insured limit.Rate this question:
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- 6.
From a safety perspective, which alternative below offers the best advice
- A.
Make sure an account is federally insured.
- B.
Make sure an account is state insured.
- C.
Avoid any institution that is not a commercial bank
- D.
Avoid using out-of-state institutions.
Correct Answer
A. Make sure an account is federally insured.Explanation
The best advice from a safety perspective is to make sure an account is federally insured. This is because federal insurance provides greater protection for depositors in case of bank failures or financial crises. State insurance may offer some level of protection, but it may not be as comprehensive or reliable as federal insurance. Avoiding institutions that are not commercial banks and using out-of-state institutions may also be good practices, but they do not guarantee the same level of safety as federal insurance.Rate this question:
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- 7.
Which of the following is not a characteristic of most passbook savings accounts?
- A.
An unlimited number of deposits or withdrawals each month
- B.
No minimum balance requirement
- C.
Interest rates are higher than money market rates.
- D.
Interest rates are higher than money market rates.
Correct Answer
C. Interest rates are higher than money market rates.Explanation
Passbook savings accounts typically do not have an unlimited number of deposits or withdrawals each month, as they often have restrictions on the frequency of transactions. They also usually have a minimum balance requirement, meaning that a certain amount of money must be maintained in the account at all times. However, the given answer states that interest rates are higher than money market rates, which is not a characteristic of most passbook savings accounts.Rate this question:
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- 8.
Money market mutual funds are best described as institutions that
- A.
Invest only in MMDAs.
- B.
Pool resources of many investors to purchase liquid and high-yielding securities.
- C.
Issued by the Treasury, commercial banks, and other corporations.
- D.
Are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets. Answer: are established by banks and other financial institutions to help depositors manage their liquid assets
Correct Answer
B. Pool resources of many investors to purchase liquid and high-yielding securities.Explanation
Money market mutual funds are institutions that pool resources of many investors to purchase liquid and high-yielding securities. These funds are not limited to investing in MMDAs or securities issued by the Treasury, commercial banks, and other corporations. Instead, their main purpose is to help depositors manage their liquid assets by investing in a diversified portfolio of short-term, low-risk securities. This allows investors to earn a competitive rate of return while maintaining liquidity and minimizing risk.Rate this question:
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- 9.
Which of the following is not a characteristic of a certificate of deposit (CDs)?
- A.
You pay a penalty for early redemption.
- B.
You "lock in" (are guaranteed) the stated interest if you hold the CD until maturity.
- C.
They are preferred over money market deposits if you expect interest rates to fall
- D.
They have a minimum maturity of three years.
Correct Answer
D. They have a minimum maturity of three years.Explanation
Certificates of deposit (CDs) are time deposits offered by banks and financial institutions. They have a fixed maturity date and typically offer a higher interest rate compared to regular savings accounts. One characteristic of CDs is that you pay a penalty for early redemption, meaning if you withdraw your funds before the maturity date, you will be charged a fee. Another characteristic is that if you hold the CD until maturity, you are guaranteed the stated interest rate. Additionally, CDs are often preferred over money market deposits if you expect interest rates to fall. However, the statement that is not a characteristic of CDs is that they have a minimum maturity of three years. CDs can have various maturity periods, ranging from a few months to several years.Rate this question:
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- 10.
Depositors often cite ________ as the most important consideration in selecting a particular bank.
- A.
Safety
- B.
Low charges
- C.
Size
- D.
Geographical convenience
Correct Answer
D. GeograpHical convenienceExplanation
Depositors often prioritize geographical convenience when choosing a bank because it allows them easy access to their funds and banking services. Being close to a bank branch or ATM can save time and effort when making deposits, withdrawals, or seeking assistance. It also provides a sense of security knowing that the bank is conveniently located nearby. Additionally, geographical convenience can be important for businesses that require frequent cash deposits or need to meet with bank representatives in person.Rate this question:
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- 11.
Monica Basidtes received a check and endorsed it by simply signing her name on the reverse e of the check. This is called
- A.
A special endorsement
- B.
A deposit endorsement.
- C.
A restrictive endorsement.
- D.
A blank endorsement.
Correct Answer
D. A blank endorsement.Explanation
Monica Basidtes endorsed the check by simply signing her name on the reverse side of the check. This type of endorsement is known as a blank endorsement, where the check can be cashed or deposited by anyone who possesses it, as there are no additional instructions or restrictions specified.Rate this question:
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- 12.
John issued a check to Mary who signed it as a blank endorsement. Mary lost the check. If someone finds it, he/she could
- A.
Sign his/her name under Monica's and cash the check.
- B.
Write "for deposit only" under Monica's signature and deposit it to his/her account.
- C.
Do nothing; the check must be made payable to him/her before it can be cashed.
- D.
Do nothing; since he or she is neither a payer or payee.
Correct Answer
A. Sign his/her name under Monica's and cash the check.Explanation
If someone finds the lost check with Mary's blank endorsement, they can sign their own name under Monica's and cash the check. This is because a blank endorsement means that the check is payable to whoever possesses it, and by signing it under Monica's name, the finder can claim ownership and cash it.Rate this question:
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- 13.
Which of the following statements is true concerning overdrafts?
- A.
An effective way to prevent them is to "overload" the account.
- B.
They can be avoided by arranging an automatic transfer from a savings account.
- C.
They are inexpensive nuisances because banks usually do not charge for overdrafts.
- D.
They differ from "bounced checks" in that "bouncing" a check is a mistake while an overdraft is deliberate.
Correct Answer
B. They can be avoided by arranging an automatic transfer from a savings account.Explanation
An effective way to prevent overdrafts is to arrange an automatic transfer from a savings account. This means that if the checking account does not have enough funds to cover a transaction, money will automatically be transferred from the savings account to cover the shortfall. By doing this, the account holder can avoid overdraft fees and the inconvenience of having a transaction declined due to insufficient funds.Rate this question:
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- 14.
The least effective method of protecting against overdrafts generally is to
- A.
Maintain a larger-than-normal account balance. to cover the overdraft.
- B.
Arrange for automatic transfers from a savings account.
- C.
Rrange for a credit-card loan effective method of protecting against overdrafts generally is to
- D.
Ignore them since banks do not charge for overdrafts.
Correct Answer
D. Ignore them since banks do not charge for overdrafts.Explanation
Ignoring overdrafts is the least effective method of protecting against them because banks do charge for overdrafts. By ignoring them, the account holder is not taking any proactive steps to prevent or address overdrafts, which can lead to fees and penalties. The other options mentioned in the question, such as maintaining a larger account balance or arranging for automatic transfers from a savings account, are more effective ways to protect against overdrafts.Rate this question:
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- 15.
Lenny, who lives in New York City, deposited in his checking account a check from his mother, who also lives in New York City. The bank should make the funds available
- A.
Immediately
- B.
) on the next business day.
- C.
Two to three days after the deposit day
- D.
After the check clears the Federal Reserve System.
Correct Answer
C. Two to three days after the deposit day -
- 16.
If you discover that someone has stolen your checks, you should
- A.
Issue an immediate stop payment for each check.
- B.
Purchase account insurance to avoid potential losses.
- C.
Inform the bank and open a new account.
- D.
Do nothing.
Correct Answer
C. Inform the bank and open a new account.Explanation
If someone has stolen your checks, it is important to inform the bank and open a new account. This is necessary to protect your finances and prevent any unauthorized transactions from taking place. By notifying the bank, they can take appropriate measures to prevent any further fraudulent activity and may also be able to help you recover any lost funds. Opening a new account ensures that the stolen checks are no longer valid and provides you with a fresh start to manage your finances securely.Rate this question:
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Current Version
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Mar 22, 2023Quiz Edited by
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Dec 08, 2015Quiz Created by
Fsparks