test bank solutions personal finance 6th canadian edition kapoor (1)

Difficulty: Easy Gradable: automatic Kapoor - Chapter 04 #3 Learning Objective: 1 Difficulty: Hard Gradable: automatic Kapoor - Chapter 04 #4 Learning Objective: 1... 124 To avoid high f

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Test Bank Solutions Personal Finance 6th Canadian Edition Kapoor Dlabay Hughes Ahmad Fortino

Chapter 04 Test Bank (key from page 14)

E a lower rate of return

2 A trust has the purpose of

A solving a person's financial problems

B obtaining low-interest loans

C handling daily money management activities

D managing the assets of a person

E improving a person's budgeting skills

3 The storage of funds for future use is the purpose of services

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

A short term loans

B long-term savings instruments

C short-term savings instruments

D variable-rate loans

E short-term loans and long-term savings instruments

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5 An all-purpose account that provides several services is a(n):

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6 Time deposits consist of

A savings accounts

B loans and charge accounts

C chequing accounts

D government securities

E profits earned by a financial institution

7 Direct deposit and automatic monthly payments are features of

E mutual savings bank

9 In recent years, membership in credit unions has

A become more difficult due to higher taxes

B continued to increase

C been limited to government employees

D declined due to poor credit union management

E stayed at about the same level

10 An advantage credit unions may have over other financial institutions is

A interest-bearing chequing accounts

B flexible-rate loans

C low-cost personal loans

D credit cards

E variable-rate savings plans

11 The major service offered by investment companies is

A interest-bearing checking accounts

B variable-rate loans

C credit card accounts

D savings bonds

E mutual funds

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12 A financial institution organized for the main purpose of providing loans to purchase homes is a

A mortgage and loan company

B mutual savings bank

C consumer finance company

D credit union

E commercial bank

13 The business hours and location of a financial institution refer to the factor of

selecting a financial institution

B a regular chequing account

C a money market account

D a money market fund

16 An advantage of Canada Savings Bonds is

A interest earned is exempt from federal income taxes

B interest earned is deferred for federal tax purposes

C a guaranteed rate of return

D they can be converted to other types of investments

E they are sold twice a year

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

A five-year GIC

B interest-bearing chequing account

C regular savings account

D six-month GIC

E money market fund

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18 Which of these is not a characteristic of the compound interest bond?

A various purchase options

B denominations of $100 up to $10,000

C interest paid on November 1 of each year

D can be purchased by cash

E cashable at any time for their face value

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

A Guaranteed Investment Certificates

22 Comparison of earnings for different savings plans can best be accomplished using the

A discounted present value

B compounded rate of return

C net present value

D effective annual rate

E after-tax rate of return

23 If the annual rate is 10%, and the interest is compounded quarterly, what is the effective annual rate?

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

A regular savings account

B interest-bearing checking account

C five-year certificate of deposit

D six-month certificate of deposit

E money market fund

26 A service designed for people who write only a few cheques each month is a(n)

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30 The purpose of a "special" endorsement is to

A cash a cheque

B deposit a cheque

C transfer a cheque to another person

D withdraw cash from your account

E reduce the charge for service fees

31 A endorsement would be used if a person is presenting a cheque in order to obtain cash

33 When preparing a bank reconciliation, outstanding cheques should be

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

34 In the bank reconciliation process, service fees should be

35 Based on the following information, what amount would be SUBTRACTED from the BANK

BALANCE side of a chequing account reconciliation? Service charge $6, Outstanding cheques $260, Interest $3 00, Deposit in transit $65

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36 The "prime" rate is

A The lending rate banks charge their most creditworthy clients

B The yield on 91-day treasury bills

C The yield on 30-year government bonds

D The yield on 1-year government bonds

E The yield on corporate bonds

37 Which best describes the prime rate of interest?

D The lending rate the Bank of Canada charges financial institutions

E The base rate for all mortgages

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

A short term loans

B short-term savings instruments

C same approach as if interest rates are rising

E long term loans

39 The yield on a savings account is also referred to as

40 Which of these is not a characteristic of the compound interest bond?

C cashable at any time for their face value

E A, B, C and D are all characteristics of the compound interest bond

41 A $100 savings account that earns $5 interest in a year has a yield of percent

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42 Savings compounded would have the lowest effective yield

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

B five year GIC

E money market fund

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

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

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60 If you think interest rates will increase, you should consider investing your money in a longer-term GIC True

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72 If you think interest rates will decrease, you should consider investing your money in a longer-term GIC

True False

73 What are the main types of financial institutions used by consumers?

74 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?

75 Brad Kellogg maintains a monthly balance in his chequing account of approximately $150, writes about 25 cheques a month, and makes three deposits each month How would Brad decide which of the following chequing accounts to use?

I a regular chequing account with a monthly fee of $4.50 for an unlimited number of cheques and no monthly balance required; no interest earned

II an interest-bearing chequing account paying 4 percent interest on balances over $300; monthly service charge of $6 when the balance is below $300

III a special chequing account that charges 35 cents a cheque and 20 cents for each deposit; no interest earned

IV a minimum-balance account that requires a $200 minimum balance to avoid the $10 monthly fee; interest earned when balance is above $400

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76 Based on the following information, find the true balance of your chequing account and the sum, if any, of deposits in transit

Balance on bank statement, $581

Total of outstanding cheques, $200

Service charges, $11

Interest earned on account, $7

Balance in your chequebook, $540

77 List the fees and charges that chequing accounts may have

78 List the 4 chequing account selection features discussed in the text

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E a lower rate of return

2 (p 118) A trust has the purpose of

A solving a person's financial problems

B obtaining low-interest loans

C handling daily money management activities

D managing the assets of a person

E improving a person's budgeting skills

Difficulty: Hard Gradable: automatic Kapoor - Chapter 04 #1 Learning Objective: 1

3 (p 118) The storage of funds for future use is the purpose of services

4 (p 121) When interest rates are rising, a person would be best served by

A short term loans

B long-term savings instruments

C short-term savings instruments

E short-term loans and long-term savings instruments

Difficulty: Easy Gradable: automatic Kapoor - Chapter 04 #3 Learning Objective: 1

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5 (p 118) An all-purpose account that provides several services is a(n):

A NOW account

B asset management account

C EFT account

D mutual fund

E money market account

6 (p 118) Time deposits consist of

7 (p 119) Direct deposit and automatic monthly payments are features of

8 (p 124) To avoid high fees for loans, a person should not borrow from a

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9 (p 123) In recent years, membership in credit unions has

A become more difficult due to higher taxes

B continued to increase

C been limited to government employees

D declined due to poor credit union management

E stayed at about the same level

10 (p 123) An advantage credit unions may have over other financial institutions is

A interest-bearing chequing accounts

11 (p 123) The major service offered by investment companies is

A interest-bearing checking accounts

Difficulty: Medium Gradable: automatic Kapoor - Chapter 04 #11 Learning Objective: 2

12 (p 124) A financial institution organized for the main purpose of providing loans to purchase homes is

a

A mortgage and loan company

B mutual savings bank

C consumer finance company

D credit union

E commercial bank

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13 (p 125) The business hours and location of a financial institution refer to the factor of

selecting a financial institution

14 (p 124) Which of the following savings plans is not covered by federal deposit insurance?

A a passbook account

B a regular chequing account

C a money market account

D a money market fund

16 (p 128) An advantage of Canada Savings Bonds is

A interest earned is exempt from federal income taxes

B interest earned is deferred for federal tax purposes

C a guaranteed rate of return

D they can be converted to other types of investments

E they are sold twice a year

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17 (p 128) Joan Zemke expects interest rates to decline over the next few months To maximize her

earnings she should use a(n)

A five-year GIC

B interest-bearing chequing account

C regular savings account

D six-month GIC

E money market fund

18 (p 128-Which of these is not a characteristic of the compound interest bond?

129)

C interest paid on November 1 of each year

E cashable at any time for their face value

19 (p 128) A saver will usually earn the highest rate with which of the following types of savings plans?

A Guaranteed Investment Certificates

20 (p 129) A $400 savings account that earns $15 interest in a year has a yield of percent

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21 (p 129) Savings compounded would have the highest effective yield

22 (p 130) Comparison of earnings for different savings plans can best be accomplished using the

A discounted present value

B compounded rate of return

C net present value

D effective annual rate

E after-tax rate of return

23 (p 130) If the annual rate is 10%, and the interest is compounded quarterly, what is the effective annual

24 (p 130) If the annual rate is 10% and inflation is 4%, then the approximate real rate of return is:

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25 (p 132) Briana Legett expects interest rates to decline over the next few months To maximize her

earnings she should use a(n):

B interest-bearing checking account

E money market fund

26 (p 132) A service designed for people who write only a few cheques each month is a(n)

27 (p 132) Kevin Friedman only needs to write a couple of cheques each month Which type of chequing

account would best serve his needs?

A an interest-earning chequing account

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29 (p 133) A personal cheque with guaranteed payment is called a

C transfer a cheque to another person

D withdraw cash from your account

E reduce the charge for service fees

31 (p 140) A endorsement would be used if a person is presenting a cheque in order to

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33 (p 142) When preparing a bank reconciliation, outstanding cheques should be

34 (p 142) In the bank reconciliation process, service fees should be

35 (p 142) Based on the following information, what amount would be SUBTRACTED from the BANK

BALANCE side of a chequing account reconciliation? Service charge $6, Outstanding cheques

$260, Interest $3 00, Deposit in transit $65

36 (p 122) The "prime" rate is

D The yield on 1-year government bonds

E The yield on corporate bonds

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