FIN 400 Exam with Questions and Answers
Definition of deposit-type financial institutions ANSWER Financial institutions that provide
traditional checking and savings accounts. Commonly referred to as "banks".
Definition of after-tax return ANSWER The actual return you earn on taxable investments
once taxes have been paid. It is equal to the taxable return (1-marginal tax rate)+the
nontaxable return.
Definition of electronic funds transfer (EFT) ANSWER Any financial transaction that takes
place electronically.
Definition of traveler's checks ANSWER Checks issued by large financial institutions, such
as Citibank, Visa, and American Express, that are sold through local banking institutions and
are similar to cashier's checks except that they don't specify a specific payee and they come in
specific denominations ($20, $50, and $100).
Definition of personal identification number (PIN) ANSWER A four-to seven-digit personal
identification number assigned to your account.
Definition of direct deposit ANSWER The depositing of payments, such as payroll checks,
directly into your checking account. This is done electronically.
Definition of cash management ANSWER The management of cash and near cash (liquid)
assets.
Definition of nondeposit-type financial institutions ANSWER Financial institutions such as
mutual funds and stock brokerage firms, which don't provide checking and savings accounts.
,Definition of money order ANSWER A check similar to a cashier's check except that it is
generally issued by the U.S. postal service or some other nonbanking institution.
Definition of federal deposit insurance corporation (FDIC) ANSWER The federal agency
that insures deposits at commercial banks.
Definition of overdraft protection ANSWER Provision of an automatic loan to your checking
account whenever sufficient funds are not available to cover checks that have been written
against the account.
Definition of annual percentage yield (APY) ANSWER The simple annual percentage yield
that converts interest rates compounded for different periods into comparable annual rates. It
allows you to easily compare interest rates.
Definition of automated teller machine (ATM) or cash machine ANSWER Machines found at
most financial institutions that can be used to make withdrawals, deposits, transfers, and
account inquiries.
Definition of liquid assets ANSWER Cash and investments that can easily be converted into
cash, such as checking accounts, money market funds, and certificates of deposit (CDs).
Definition of certificates of deposit (CDs) ANSWER Savings alternatives that pay a fixed
rate of interest while keeping your funds on deposit for a set period of time that can range
from 30 days to several years.
Definition of debit card ANSWER A card that allows you to access the money in your
accounts electronically.
, Definition of cashier's check ANSWER A check drawn on a bank or financial institution's
account.
Definition of smart cards ANSWER Similar to debit cards, but these cards actually
magnetically store their own accounts. Funds are transferred into the cards, which are then
used the same way you'd use a debit card. When the funds run out, the card is useless until
more funds are magnetically transferred in.
Definition of money market mutual funds (MMMFs) ANSWER Mutual funds that invest in
short-term (generally with a maturity of less than 90 days) notes of very high denomination.
Definition of U.S. treasury bills or T-bills ANSWER Sort-term notes of debt issued by the
federal government, with maturities ranging from 4 weeks to 12 months.
Definition of online banking ANSWER The ability to perform banking operations through
your personal computer.
Definition of U.S. savings bond ANSWER A type of security that's actually a loan on which
you receive interest, generally every 6 months for the life of the bond. When the bond
matures, or comes due, you get back your investment, or "loan". What you get back at
maturity is usually the face value of the loan, although the amount you get could be more or
less than what you paid for the bond originally.
Definition of stop payment ANSWER An order you can give your financial institution to stop
payment on a check you've written.
Definition of asset management accounts ANSWER Comprehensive financial services
packages offered by a brokerage firm, which can include a checking account; credit and debit
cards; an MMMF; loans; automatic payment of fixed payments such as mortgages; brokerage
Definition of deposit-type financial institutions ANSWER Financial institutions that provide
traditional checking and savings accounts. Commonly referred to as "banks".
Definition of after-tax return ANSWER The actual return you earn on taxable investments
once taxes have been paid. It is equal to the taxable return (1-marginal tax rate)+the
nontaxable return.
Definition of electronic funds transfer (EFT) ANSWER Any financial transaction that takes
place electronically.
Definition of traveler's checks ANSWER Checks issued by large financial institutions, such
as Citibank, Visa, and American Express, that are sold through local banking institutions and
are similar to cashier's checks except that they don't specify a specific payee and they come in
specific denominations ($20, $50, and $100).
Definition of personal identification number (PIN) ANSWER A four-to seven-digit personal
identification number assigned to your account.
Definition of direct deposit ANSWER The depositing of payments, such as payroll checks,
directly into your checking account. This is done electronically.
Definition of cash management ANSWER The management of cash and near cash (liquid)
assets.
Definition of nondeposit-type financial institutions ANSWER Financial institutions such as
mutual funds and stock brokerage firms, which don't provide checking and savings accounts.
,Definition of money order ANSWER A check similar to a cashier's check except that it is
generally issued by the U.S. postal service or some other nonbanking institution.
Definition of federal deposit insurance corporation (FDIC) ANSWER The federal agency
that insures deposits at commercial banks.
Definition of overdraft protection ANSWER Provision of an automatic loan to your checking
account whenever sufficient funds are not available to cover checks that have been written
against the account.
Definition of annual percentage yield (APY) ANSWER The simple annual percentage yield
that converts interest rates compounded for different periods into comparable annual rates. It
allows you to easily compare interest rates.
Definition of automated teller machine (ATM) or cash machine ANSWER Machines found at
most financial institutions that can be used to make withdrawals, deposits, transfers, and
account inquiries.
Definition of liquid assets ANSWER Cash and investments that can easily be converted into
cash, such as checking accounts, money market funds, and certificates of deposit (CDs).
Definition of certificates of deposit (CDs) ANSWER Savings alternatives that pay a fixed
rate of interest while keeping your funds on deposit for a set period of time that can range
from 30 days to several years.
Definition of debit card ANSWER A card that allows you to access the money in your
accounts electronically.
, Definition of cashier's check ANSWER A check drawn on a bank or financial institution's
account.
Definition of smart cards ANSWER Similar to debit cards, but these cards actually
magnetically store their own accounts. Funds are transferred into the cards, which are then
used the same way you'd use a debit card. When the funds run out, the card is useless until
more funds are magnetically transferred in.
Definition of money market mutual funds (MMMFs) ANSWER Mutual funds that invest in
short-term (generally with a maturity of less than 90 days) notes of very high denomination.
Definition of U.S. treasury bills or T-bills ANSWER Sort-term notes of debt issued by the
federal government, with maturities ranging from 4 weeks to 12 months.
Definition of online banking ANSWER The ability to perform banking operations through
your personal computer.
Definition of U.S. savings bond ANSWER A type of security that's actually a loan on which
you receive interest, generally every 6 months for the life of the bond. When the bond
matures, or comes due, you get back your investment, or "loan". What you get back at
maturity is usually the face value of the loan, although the amount you get could be more or
less than what you paid for the bond originally.
Definition of stop payment ANSWER An order you can give your financial institution to stop
payment on a check you've written.
Definition of asset management accounts ANSWER Comprehensive financial services
packages offered by a brokerage firm, which can include a checking account; credit and debit
cards; an MMMF; loans; automatic payment of fixed payments such as mortgages; brokerage
