Frankie’s savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him?

Yes, savings account interest is taxable

No, interest earned on a savings account is not taxable

A sales tax will be charged on interest earned

If the interest is under $50, it is not taxable

A bank Certificate of Deposit (CD) is a:

Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals

Savings instrument that requires a deposit for a period of time during which the saver can withdraw money from the plan at any time without a penalty

Cash deposit in a savings account that earns interest

Certificate for deposits that are issued for half the face value

How can individuals be prepared for losing their job or having a large medical expense?

Have savings of at least three-six months of income

Maintain a checking account with sufficient funds

Margaret wants to store a valuable coin collection and important papers. Generally, consumers should:

Rent a safe deposit box for their valuables

Store valuables in a cabinet at home

Hand valuables over to their attorney

Store valuables in a locked drawer at home

The best reason for depositing money in a bank or credit union savings account instead of keeping your money “under the mattress” is that:

Money deposited in a savings account are FDIC or NCUA insured

Most savings accounts earn a guaranteed a high rate of interest

Most savings accounts come with a free credit card

Money in a savings account can be accessed any time during the day or night

The most liquid type of investment is:

Real estate holdings (your house)

The “Rule of 72” is an easy way to:

Calculate how fast your savings will double in value at a given interest rate

Approximate your savings balance each year

Calculate how much tax you will owe on the interest earned

Calculate the length of time it takes to pay off a credit balance

The information that a lender must disclose to consumers applying for a cash loan is:

The annual percentage rate (APR) and/or the finance charge

The formula for compounded interest

The time value of money refers to the concept that money:

Received today is worth more than the same amount of money received in the future

Changes in value along with interest rates

Money will double in value over seven years

Is the foundation for developing a financial plan

Which type of financial institution usually pays the highest rate of interest on savings account balances?

Investment firm money market accounts

The annual percentage rate (APR) is:

The true cost of credit that must be disclosed on a loan agreement

Required by the Securities Exchange Commission

Required by the Comptroller of the Currency

Which statement is FALSE about most ATM (Automated Teller Machine) cards?

You can always get cash anywhere in the world with no fee

You must have an account with a financial institution to have an ATM card

You can generally obtain information concerning your account balance at an ATM machine

You can generally get cash 24 hours a day, seven days a week.

Susan gives Marie her debit card and personal identification number (PIN) so Marie could get $25 from her bank account. Marie withdrew $100 instead of the agreed to $25. How can Susan get the $75 back?

No bank or government agency is obligated to reimburse Susan because she authorized Marie to use her ATM card and PIN

Demand the bank reimburse her for the unauthorized transaction

File a complaint with the Federal Reserve board

Demand Marie’s bank pay her back

Sell corporate stocks to the public

Take in and secure people’s money

Make loans to individuals and businesses

Pay interest on the money on deposit with the bank

Which of the following statements about banks is true?

All banks must follow state and government regulations

All banks in a community charge the same fees for services

When one bank raises the interest rate it gives on deposits, all other banks will match that rate of interest

ATM fees are not charged when a person uses a bank near his home

Why do banks require a person to have a PIN in order to use the ATM?

They require the number to be used along with the debit card or ATM card to help prevent the person from theft

They want to know that a person does not have accounts at a competing bank

They require the information to update the customer’s account

They want to be sure that a person has enough money in the account before writing a check

Why do many people prefer to use a debit card instead of a credit card?

They can purchase items and have the money withdrawn directly from their account without having to pay interest on a credit card balance

They can earn interest on accounts equal to 5 percent of purchases made with the debit card

They do not have to worry about overdrawing on their checking accounts

There are no fees charged when a debit card is used to withdraw money from an out-of-network ATM

Having overdraft protection on a checking account is a good idea but it can also be an expensive feature. Why?

A fee, which can be as high as $15-30, is charged every time overdraft protection on the checking account is used

Banks charge a monthly fee for having overdraft protection on their checking accounts

The bank charges 20 percent of the amount taken from the overdraft protection

The bank stops paying the person interest on savings accounts or CDs each time overdraft protection is used

What is the purpose of a check register?

A person can keep track of all deposits to and withdrawals from the checking account

It automatically balances a person’s checking account

A person who balances his own checking account does not have to pay a bank fee for the service

It protects a person from identity theft

Why do people sometimes have to use a cashier’s check instead of a personal check?

The person is buying a large item such as a car and the dealership will only accept a check that is charged against a bank’s account.

The person has a poor credit record and hopes to improve his credit score by using cashier’s checks that are guaranteed by the bank

The person wants a safe way to transfer money from her CD that has just matured to her checking account at the bank.

The person does not have enough money in her checking account so she borrows money from the bank in the form of a cashier’s check.

Why did the government establish the Federal Deposit Insurance Corporation (FDIC)?

The government wanted to protect people from losing their money if the banks failed

The government wanted to be sure that banks did not fail

The government wanted to be sure that people who took bank loans would be charged a fair rate of interest

The government wanted to protect the banks from being taken over by other businesses

A person has $50,000 in certificates of deposit (CDs), $25,000 in a savings account, $35,000 in a NOW account, and $12,000 in a checking account all in the same bank (insured by FDIC). If the bank fails, the amount of his money that will be protected is:

Only the $25,000 in the savings account

Only the $50,000 in the certificates of deposit

What is a credit union?

It is a nonprofit business that functions like a bank and is owned by its members.

It is a business that brings together a number of other businesses that offer credit to the public

It is a bank that only makes loans to members of labor unions

It is a business that is run by the federal government and whose job it is to make credit available to low-income people.

A person should include an emergency fund in his financial plan to:

Have money to pay living expenses if he loses his job or has a serious illness or injury

Have money available in case he wants to go on an unplanned vacation with friends

Have money available for daily spending during retirement

Have at least two months of salary in cash to pay off credit cards

Person A is age 40 and planning to retire in 25 years. Person B is age 25 and planning to retire in 40 years. Both invest $5000 in an IRA with a guaranteed 10% annual rate of return on the investment and neither one adds to the account again. At retirement, person A has about $53,000 in his account and Person B has about $230,000 in her account. Why is there such a huge difference in the value of the IRAs?

Person B’s account had longer to benefit from the compounding of interest

Person A’s account lost money during the recession

Person A was penalized for not keeping money in the account for at least 30 years

Person B’s account earned a higher rate of interest during periods of prosperity

Purchases made with your debit card are usually:

Deducted immediately from your checking account

Deducted from your credit card balance

Personal Finance Unit 2 Review

Authored by Brianna Lemmons

Life Skills

10th - 12th Grade

Used 13+ times

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45 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify who?

Internal Revenue Service (IRS) – part of the US Treasury Department

Federal Deposit Insurance Corporation (FDIC)

State Banking Commission

Federal Reserve Board

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Doug wants to buy a car in two months, but does not have enough money. What is the best way for Doug to get the money he needs?

Purchase a certificate of deposit (CD)

Take out a loan

Open a NOW account

Apply for a thirty year mortgage

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Money orders are:

Distributed by the Treasury Department

Available for no fee at banks and retail stores

A guaranteed form of payment to pay a specified amount to a specific payee

More trusted than certified/cashiers checks

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which financial product has the most predictable income?

Stocks

Real estate

Lottery

Certificate of deposit (CD)

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What action should a person take who must make a tuition payment at the end of August each year?

Divide the total amount of money that will be needed into 12 equal parts in a separate account each month

Divide the total amount of money that will be needed into 12 equal parts and invest that amount in stocks

Obtain a short-term collateralized loan for the needed amount of money

Apply to open a new credit card account that will be used to charge the needed amount of money

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The financial institution where Mrs. Lemmons has her checking account will continue to pay out money for the checks she writes as long as:

She uses checks from her checkbook

The financial institution has enough money

There is enough money in Mrs. Lemmons' account to cover the amount of the checks

She maintains a good checkbook register

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Financial services and products that are typically offered by banks and credit unions include:

Real estate listings (houses and properties)

Savings and loans

Legal services (lawyer)

Business plans

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Personal Finance Unit 2 Review

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify who?

Doug wants to buy a car in two months, but does not have enough money. What is the best way for Doug to get the money he needs?

Money orders are:

Which financial product has the most predictable income?

What action should a person take who must make a tuition payment at the end of August each year?

The financial institution where Mrs. Lemmons has her checking account will continue to pay out money for the checks she writes as long as:

Financial services and products that are typically offered by banks and credit unions include:

Frankie’s savings account has earned a lot of interest. He wants to know if he must pay taxes on the interest earned. What would the IRS tell him?

The term used to describe the ease and speed with which you can convert savings or an investment to cash is:

A bank Certificate of Deposit (CD) is a:

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