Financial Institutions, Banking, and Investing
1. Which of the following is NOT a common feature of a financial institution? Choose 3
- b) paper checks
- e) investment trading
- h) access to investment advice
Explanation:
- Paper checks are not a feature exclusive to financial institutions.
- Investment trading and access to investment advice are common features of financial institutions.
2. Which of the following statements about check cashing companies is TRUE?
- c) they charge high fees
Explanation: Check cashing companies are known for charging relatively high fees for their services.
3. Which of the following financial institutions typically have the highest fees?
- a) check cashing and payday loan companies
Explanation: Check cashing and payday loan companies are known for charging high fees, making them financial institutions with comparatively higher fees.
4. Which of the following statements about check cashing companies is FALSE?
- b) they charge low fees
Explanation: Check cashing companies are known for charging high fees, and they often involve additional charges, making the statement false.
5. Which type of bank account typically offers the least (if any) interest?
- a) Checking account
Explanation: Checking accounts typically offer little to no interest compared to other types of accounts.
6. Savings accounts typically offer more interest than what type of account?
- c) checking account
Explanation: Savings accounts generally offer higher interest rates than checking accounts.
7. Which type of bank account is best for everyday transactions?
- a) checking account
Explanation: Checking accounts are designed for everyday transactions, providing easy access to funds for activities like payments and withdrawals.
8. A savings account that compounds interest daily will earn a higher return than a savings account simple interest daily. True or False?
- True
Explanation: True. Compounding interest daily allows for the calculation of interest on both the initial principal and accumulated interest, resulting in higher returns compared to simple interest.
9. Which savings account will earn you the least money?
- b) one that earns simple interest monthly
Explanation: A savings account that earns simple interest monthly will generally yield lower returns compared to accounts with more frequent compounding.
10. Which savings account will earn you the most money?
- a) one that compounds interest daily
Explanation: A savings account that compounds interest daily will yield higher returns due to more frequent compounding.
11. Why is it important to reconcile your bank statements?
- d) all of the above
Explanation: Reconciling bank statements helps in managing finances, avoiding overspending, detecting errors, and identifying any unauthorized fees.
12. How can you avoid spending more than what is in your bank account?
- c) keep your own records to compare with your financial institution’s records
Explanation: Keeping personal records and comparing them with the financial institution’s records helps prevent overspending and ensures accurate financial management.
13. How would you reconcile your bank account to avoid spending more than you have?
- b) Compare your own records of your spending with your financial institution’s records
Explanation: Reconciling involves comparing personal spending records with the financial institution’s records to ensure accuracy and avoid overspending.
14. What should you do before you withdraw money from the ATM?
- c) inspect the ATM to make sure it wasn’t tampered with
Explanation: Before withdrawing money from an ATM, it’s important to inspect the machine for any signs of tampering to ensure the transaction’s security.
15. What should you do before you approach an ATM?
- d) check for any suspicious people lurking nearby
Explanation: Before approaching an ATM, it’s essential to be aware of the surroundings and check for any suspicious individuals to ensure personal safety.
16. Which of the following statements about savings accounts is FALSE? Choose 2
- b) savings accounts allow an unlimited amount of withdrawals each month
- e) savings accounts don´t usually pay interest on the money you deposit
Explanation:
- Savings accounts typically have restrictions on the number of withdrawals allowed per month.
- Savings accounts do pay interest on the money deposited.
17. Which of the following statements is true?
- c) if there is a mistake on your bank account, you should contact your financial institution
Explanation: In case of a mistake on a bank account, contacting the financial institution is the recommended action to resolve the issue.
18. If there is an issue with your bank statement or account balance, who should you contact to resolve the issue?
- b) your bank
Explanation: Contacting your bank is the appropriate step to resolve issues related to bank statements or account balances.
19. True or false: your financial institution can’t help you if there is a mistake on your bank account statement.
- False
Explanation: False. Financial institutions can assist in resolving issues or mistakes on bank account statements.
20. Which of the following statements about investing is TRUE?
- b) investing is riskier than putting money in a savings accounts
Explanation: True. Investing involves a level of risk, and returns are not guaranteed, unlike placing money in a savings account.
21. Investing is best for ___
- c) long-term financial goals, like paying for retirement
Explanation: Investing is generally recommended for long-term financial goals, such as saving for retirement, as it allows for potential growth over time.
22. Which of the following statements about investing is FALSE?
- a) investing is a guaranteed way to grow your money
Explanation: False. Investing carries risk, and returns are not guaranteed.
23. A stock is___
- c) a share of ownership in a company
Explanation: A stock represents ownership in a company, and stockholders are entitled to a portion of the company’s assets and earnings.
24. A ___ is a share of ownership in a company
- b) stock
Explanation: A stock is indeed a share of ownership in a company.
25. A mutual fund is ___
- c) a type of investment that invests in a mix of different types of investments
Explanation: A mutual fund pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities.
26. Which of the following statements about stocks is TRUE?
- a) a stock is a share of ownership in a company
Explanation: True. A stock represents ownership in a company, and stockholders are entitled to a portion of the company’s assets and earnings.