Question 1

If the annual rate is 3% and inflation is 2%, then the approximate real rate of return is:

Accepted Answer

A)  5.00% 
B)  3.00% 
C)  1.00% 
D)  - 1.0% 
E)  0%

Question 2

A personal cheque with guaranteed payment is called a

Accepted Answer

A)  traveler's cheque. 
B)  bank draft. 
C)  certified cheque. 
D)  money order. 
E)  cashier's cheque.

Question 3

Time deposits are more commonly referred to deposits made to savings accounts and investment certificates.

Accepted Answer

A) True 
 B)False

Question 4

If the annual rate is 8%, and the interest is compounded quarterly, what is the effective annual rate?

Accepted Answer

A)  8.00% 
B)  10.25% 
C)  10.38% 
D)  7.85% 
E)  8.24%

Question 5

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n)

Accepted Answer

A)  five-year GIC. 
B)  interest-bearing chequing account. 
C)  regular savings account. 
D)  six-month GIC. 
E)  money market fund

Question 6

Robert expects interest rates to rise over the next few months. To maximize his earnings he should use a:

Accepted Answer

A)  regular savings account. 
B)  five year GIC. 
C)  five-year certificate of deposit. 
D)  six-month certificate of deposit. 
E)  money market fund

Question 7

A saver will usually earn the highest rate with which of the following types of savings plans?

Accepted Answer

A)  Guaranteed Investment Certificates 
B)  club account 
C)  passbook account 
D)  share account 
E)  NOW account

Question 8

In the bank reconciliation process, service fees should be

Accepted Answer

A)  added to the bank statement balance. 
B)  subtracted from the bank statement balance. 
C)  added to the chequebook balance. 
D)  subtracted from the chequebook balance. 
E)  added to direct deposits.

Question 9

The rate of return on a savings account is also referred to as

Accepted Answer

A)  liquidity. 
B)  compounding. 
C)  asset management. 
D)  insolvency. 
E)  yield.

Question 10

If the annual rate is 10% and inflation is 4%, then the approximate real rate of return is:

Accepted Answer

A)  14.00% 
B)  4.00% 
C)  6.00% 
D)  6.80% 
E)  7.00%

Question 11

The use of electronic banking does not add to the "float" time for financial services customers.

Accepted Answer

A) True 
 B)False

Question 12

A "free" chequing account with a minimum balance of $500 has no opportunity cost.

Accepted Answer

A) True 
 B)False

Question 13

The more frequent the compounding, the less a person will earn on a savings account.

Accepted Answer

A) True 
 B)False

Question 14

If the annual rate is 8%, and the interest is compounded monthly, what is the effective annual rate?

Accepted Answer

A)  8.00% 
B)  10.25% 
C)  10.38% 
D)  7.85% 
E)  8.30%

Question 15

A trust is a safe place for people to make large deposits for maximum security

Accepted Answer

A) True 
 B)False

Question 16

When interest rates are falling, a person would be best served by

Accepted Answer

A)  short term loans 
B)  short-term savings instruments. 
C)  same approach as if interest rates are rising. 
D)  variable-rate loans. 
E)  long term loans.

Question 17

Evan Kostakis is living in this country while going to school. He is not familiar with the operation of savings plans available to consumers. What factors would you recommend that he consider when evaluating and comparing different savings plans?

Accepted Answer

The answer of Evan Kostakis is living in this country...

Question 18

The major service offered by investment companies is

Accepted Answer

A)  interest-bearing checking accounts. 
B)  variable-rate loans. 
C)  credit card accounts. 
D)  savings bonds. 
E)  mutual funds.

Exam 4: The Banking Services of Financial Institutions

If the annual rate is 3% and inflation is 2%, then the approximate real rate of return is:

A personal cheque with guaranteed payment is called a

Time deposits are more commonly referred to deposits made to savings accounts and investment certificates.

If the annual rate is 8%, and the interest is compounded quarterly, what is the effective annual rate?

Joan Zemke expects interest rates to decline over the next few months. To maximize her earnings she should use a(n)

Robert expects interest rates to rise over the next few months. To maximize his earnings he should use a:

A saver will usually earn the highest rate with which of the following types of savings plans?

In the bank reconciliation process, service fees should be

The rate of return on a savings account is also referred to as

If the annual rate is 10% and inflation is 4%, then the approximate real rate of return is:

The use of electronic banking does not add to the "float" time for financial services customers.

A "free" chequing account with a minimum balance of $500 has no opportunity cost.

The more frequent the compounding, the less a person will earn on a savings account.

If the annual rate is 8%, and the interest is compounded monthly, what is the effective annual rate?

A trust is a safe place for people to make large deposits for maximum security

When interest rates are falling, a person would be best served by

Evan Kostakis is living in this country while going to school. He is not familiar with the operation of savings plans available to consumers. What factors would you recommend that he consider when evaluating and comparing different savings plans?

The major service offered by investment companies is