Exam 5: Banking and Interest Rates

When interest rates rise,individuals who make deposits will earn a ________ rate of interest,while individuals who need to borrow funds will have to pay a ________ rate.

An increase in spending by the U.S.government will result in all of the following except:

Discuss interest rates in general in the United States and the affects of rising and falling interest rates.Does the Federal Reserve take an active role in setting interest rates?

Information such as ________ can be easily found on a variety of Web sites.

Which of the following is not true regarding certificates of deposit (CDs)?

Interest rate changes are affected by the relationship of the total supply of funds provided by all investors and the total demand for funds by all borrowers.

Financial institutions offering traditional checking and savings accounts as well as providing loans to both individuals and firms are called ________.

Jack has $1,000 that he wishes to invest for the next two years.One-year CDs are currently paying 8 percent while two-year CDs are paying 12 percent.Economists are predicting that interest rates will rise by the end of the year.What is the minimum amount interest rates would have to increase to make the one-year CD better than the two-year? (a)16 percent (b)14 percent (c)12 percent (d)10 percent

Your commercial bank is offering a one-year CD with an interest rate of 7 percent.A competing bank offers an interest of 10 percent on their one-year certificate.The risk premium offered by the competing bank is

Introductory high interest rates paid by financial institutions for new accounts are usually a good deal and you should therefore take advantage of them without question.

In order to have a safety deposit box at a bank,a person needs to also maintain another checking or savings account at that bank.

Which of the following will not vary at a commercial bank?

A ________ is a check that is written on behalf of a person to a specific payee and will be charged against a financial institution's account.

If you wish to make purchases that are charged against your checking account without writing a check you need to have a(n)________.

It is illegal for a federally insured financial institution to charge those with poor credit higher interest rates than those with good credit.

The ________ is the return on an investment that is guaranteed for a specified period.

Describe how interest rates affect your personal budget,income statement,and balance sheet.What account groups do they affect? Give two specific examples.

The ________ is an additional return beyond the risk-free rate that can be earned from a deposit guaranteed by the government.

When the Federal Reserve wishes to ________ interest rates,it ________ the amount of funds at commercial banks.

Which of the following is not a depository institution?