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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

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CHAPTER 05—DEPOSITS IN BANKS

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.
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

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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

13. What term best describes companies obtaining financing directly from capital markets
(without using banks for financing)?
a. rate chasers
b. interbank transactions

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CHAPTER 05—DEPOSITS IN BANKS

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

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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
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.

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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
c. Regulation D

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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

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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

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

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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: BNKG.CFFT.3.LO: 5.2.1 - LO:
5.2.1

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

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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 OBJECT BNKG.CFFT.3.LO: 5.1.1 - LO: 5.1.1
IVES:

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 OBJECTI BNKG.CFFT.3.LO: 5.1.1 - LO: 5.1.1
VES:

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 OB BNKG.CFFT.3.LO: 5.1.2 - LO: 5.1.2
JECTIVES:

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

ANSWER: The basic formula for calculating simple interest is Principal × Rate
× Time.
POINTS: 1
LEARNING OBJECTIVES BNKG.CFFT.3.LO: 5.2.1 - LO: 5.2.1
:

44. In general, what determines the money supply?

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

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POINTS: 1
LEARNING OBJECTIVES: BNKG.CFFT.3.LO: 5.3.2 - LO: 5.3.2

45. What are disclosure statements?

ANSWER: Disclosure statements provide bank customers full information about bank
policies. They are required by law.
POINTS: 1
LEARNING OBJEC BNKG.CFFT.3.LO: 5.4.2 - LO: 5.4.2
TIVES:

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 O BNKG.CFFT.3.LO: 5.1.1 - LO: 5.1.1
BJECTIVES:

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 O BNKG.CFFT.3.LO: 5.1.2 - LO: 5.1.2
BJECTIVES:

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 O BNKG.CFFT.3.LO: 5.2.2 - LO: 5.2.2
BJECTIVES:

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

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ANSWER: 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 O BNKG.CFFT.3.LO: 5.3.2 - LO: 5.3.2
BJECTIVES:

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
LEARNING O BNKG.CFFT.3.LO: 5.4.2 - LO: 5.4.2
BJECTIVES:

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