Banking Wise Practice Test Exam Questions with 100% Correct Answers 2024

Banking Wise Practice Test Exam Questions with 100% Correct Answers 2024 If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the - answerUS Treasury Department- In order to track large deposits, the federal government requires that deposits of $10,000 or more be reported to the Treasury Department. Some concerns may be that a person might be trying to avoid paying taxes on game winnings or perhaps illegal gains The National Credit Union Administration (NCUA) insures accounts in: - answerCredit unions - The National Credit Union Association (NCUA) insures each depositor's accounts up to $100,000 in one credit union. For example, if a customer has a checking account of $1,000 and a savings account of $8,000 in the same credit union, the customer will have total insurance coverage of $9,000 When James received his paycheck, he planned to cash it at a check cashing store. You advise him to cash it at his own bank if possible. Why? - answerThey typically charge high fees - Check-cashing stores usually charge high fees to cash checks and sometimes encourage consumers to take out high interest rate payday loans The term used to describe the ease and speed with which you can convert savings or an investment to cash is: - answerLiquidity - The ease and speed with which you can convert savings or an investment to cash is called liquidity. Checking and statement savings accounts are highly liquid because deposits and withdrawals can be made at any time. A certificate of deposit has less liquidity because it has a fixed term - a period during which money must be kept on deposit. There can be substantial penalties for cashing in a certificate of deposit before the end of its term, perhaps losing up to three to six months' interest Banks use savings account deposits to - answerGive loans to consumers and businesses - The basic functions of banks and credit unions are to be an intermediary between savers and borrowers. Banks and credit unions pay interest on customers' savings accounts and hold customers' money through checking accounts and then lend most of that money to other consumers and businesses for a fee (interest). Troy has $50 a month transferred electronically from his checking account to his savings account. This is an example of: - answerA savings plan - When a consumer requests that his or her bank or credit union electronically transfer money from a checking account to a savings account every month, it is a (forced) savings plan. If you manage your checking account so there are always enough funds to cover the transfer, a forced savings plan is a good option because you avoid the problem of not making regular deposits in your savings account and spending the money instead. Starting a (forced) savings plan with automatic deposits is one way to do what is known as "paying yourself first." Pat has a savings account and a car loan from a not-for-profit financial institution owned by its members. She is probably a member of what type of financial institution? - answerCredit union - Credit unions are not-for-profit savings and lending financial institutions. Membership in a credit union is made up of individuals who have something in common, such as a place of employment, membership in a professional organization, or residence in the same geographic area. Loans are made to its members from the savings of other members. Loan costs tend to be lower and savings interest rates higher at credit unions than at other types of financial institutions Money orders are - answerA purchased certificate to pay a specified amount to a specific payee - A money order is a purchased certificate used to pay a specified amount to a specific payee. They are a safe, convenient way to send payment through the mail as an alternative to personal checks or cash. Money orders sold and backed by the U.S. Postal Service are called postal money orders. Private companies, such as banks, credit unions, supermarkets, convenience stores, and drug stores, also sell money orders for a fee. Which financial product can you buy for $25, is safe, and will be worth $50 at a future date? - answerSeries EE savings bond - Series EE savings bonds, which are issued and backed by the U.S. Treasury, are purchased for one-half of their face value. These bonds earn interest monthly, and a $50 Series EE bond, which is purchased for $25, is guaranteed to reach face value within 17 years, and may reach face value sooner. A bank Certificate of Deposit is a: - answerSavings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals - A certificate of deposit (CD) is a savings instrument that requires a deposit for a period of time (term) during which the saver cannot withdraw money from the plan without a penalty. CDs are issued with terms from 31 days up to eight years. The longer the consumer agrees to loan the money to the bank or credit union, generally the higher the interest rate. It is considered a form of savings because the consumer is paid interest based on the dollar amount and term of the CD. If the consumer does not collect his/her money at the e