Chapter 5: The Banking System

Question 1

A person that purchases a $10,000 CD at 10% for 5 years, will receive______ at maturity

Answer 1

10000 * .10 * 5 = $5,000 simple interest

10000 + 5000 = $15,000 at maturity

Question 2

If you save $10,000 this year and invest it in a CD at 3% for one year, you will earn _________ in interest.

Answer 2

10000 * .03 * 1 = $300 interest

Question 3

Typical bank services are:

Answer 3

Checking accounts
Savings accounts
Safe Deposit boxes
Cashier’s Checks

Question 4

What can happen if you bounce a check?

Answer 4

You would have Non-Sufficient Funds

Question 5

What are some advantages of internet banking

Answer 5

Balances checked at any time
Transferring money between accounts
Online/electronic bill payments

Question 6

Banks make money by charging _____ interest rates on loans

Answer 6

Higher

Question 7

The formula to calculate simple interest is

Answer 7

I = Principal x Rate x Time

Question 8

A card issued by your bank that is linked to your bank account that allows you to make purchases in a store or withdraw money at an ATM

Answer 8

Debit Card

Question 9

What insures your money in the bank in the event of bank failure

Answer 9

FDIC

Question 10

A type of bank account that gives a modest interest rate and can be withdrawn fairly easily

Answer 10

Savings Account

Question 11

Fees charged by your bank

Answer 11

Service Charges

Question 12

A type of endorsement that limits the use of a check

Answer 12

Restrictive

Question 13

A type of bank account that is used to make deposits and withdrawals regularly

Answer 13

Checking Account

Question 14

A check that you wrote but it has not appeared on your bank statement yet

Answer 14

Outstanding Check

Question 15

A check written that does not have enough money in the account to cover it is referred to as

Answer 15

Bounced Check
Returned Check
Non-Sufficient Funds

Question 16

A numerical code on the bottom left of a check used to identify the bank

Answer 16

Routing Number

Question 17

The process of making sure your check register and bank statement balance at the end of the month

Answer 17

Bank Reconicliation

Question 18

A tool used to keep a running balance of your account including checks written, withdrawals, deposits and fees

Answer 18

Checkbook Register

Question 19

Money deducted from a checking or savings account

Answer 19

Withdrawal

Question 20

What are the 6 steps to completing a check

Answer 20

Date
Pay to the order of
Amount in numbers
Amount in words
Memo (optional)
Signature

Question 21

A written order to a bank to pay the state amount to the person or business named

Answer 21

Check

Question 22

Money added to a checking or savings account

Answer 22

Deposit

Question 23

The FDIC insures what types of accounts

Answer 23

Checking
Savings
Certificates of Deposit

Question 24

The banks record of an account holders transactions sent every month

Answer 24

Bank Statement

Question 25

Why might you open a checking account

Answer 25

Checks are safer than cash Checks serve as proof of payment Money is FDIC protected

Question 26

A check you have written that has been cashed or deposited into the payee's account

Answer 26

Canceled Check

Question 27

When you make a mistake on a check you can

Answer 27

Void it

Question 28

A deposit that you have made to your account that does not appear on your bank statement yet

Answer 28

Deposit in Transit

Question 29

A loan that banks offer to protect them when they write a check for an amount more than what is in their account

Answer 29

Overdraft Protection

Question 30

Which type of bank account will usually pay the most interest

Answer 30

Certificate of Deposit

Question 31

A form of payment for workers so they do not have to physically go to the bank to deposit money

Answer 31

Direct Deposit

Question 32

The difference between the amount that the bank gives out on deposited funds and charges on money to borrowers

Answer 32

Spread

Question 33

A card that allows you to make purchases in stores and online but must be repaid (similar to a loan)

Answer 33

Credit Card

Question 34

A card issued by the bank that only allows you to withdraw money from an automatic teller machine

Answer 34

ATM Card

Question 35

The amount of money that a bank charges someone for borrowing money

Answer 35

Interest

Question 36

Writing FOR DEPOSIT ONLY on the back of a check is a example of which type of endorsement

Answer 36

Restrictive

Question 37

A person who invest their money and receives compound interest will receive _____ money over time

Answer 37

More

Question 38

Compound interest is when interest is ______ back onto the principal amount

Answer 38

Added

Question 39

The sum of money set aside on which interest is paid

Answer 39

Principal

Question 40

According to the Rule of 72 if $100 is invested for 10 years, what interest rate would it need to be invested at?

Answer 40

7.2%

Question 41

FDIC stands for

Answer 41

Federal Deposit Insurance Corporation

Question 42

If $2,000 is invested at 6% annual interest for 6 months, how much simple interest would you have

Answer 42

$60.00

Question 43

The person writing a check is the

Answer 43

Drawer

Question 44

According to the Rule of 72 if $100 is invested at 6 percent interest, how long will it take to grow to $100?

Answer 44

12 years

Question 45

FDIC insures your money up to

Answer 45

$250,000

Question 46

What occurs when someone alters a check by changing its amount to obtain more money from another person’s account?

Answer 46

Check fraud

Question 47

A check issued against the bank’s funds is a

Answer 47

Cashier’s check

Question 48

When you open an account in a bank what do they make you sign to give them a sample of how you sign your name.

Answer 48

Signature Card