final - chapter 17

Question 1

Where is money made?

Answer 1

At the US Mint

Question 2

the federal agency that helps to regulate banks and other financial institutions

Answer 2

Federal Deposit Insurance Corporation (FDIC)

Question 3

What is the purpose of a check / bank reconciliation?

Answer 3

• to make sure you nor the bank made any errors
• to make sure you did not forget to record any transactions
• to make sure your records match the bank’s records

Question 4

• heads the Fed
• is the current Chair of the Board of Governors of the Federal Reserve System
• she is considered one of the most powerful people in the world because she controls inflation/deflation and controls interest rates, which controls the economy

Answer 4

Janet Yellen

Question 5

the percentage cost of credit on a yearly basis

Answer 5

annual percentage rate (APR)

Question 6

What are two ways banks make money?

Answer 6

1. from interest received on loans
2. from fees charged on accounts

Question 7

a system set up by the federal govenment to supervise and regulate memeber banks and to help banks serve the public efficiently

Answer 7

Federal Reserve System (Fed)

all national banks are required to join the Federal Reserve System, and state banks may join

Question 8

the percentage rate equal to the total amount of interest that a $ deposit would earn based on 365 day period

Answer 8

annual percentage yield (APY)

Question 9

writing a check for more money than is in your account

Answer 9

Overdrawn / NSF / Overdraft

Question 10

special ink used in checks so they cannot be copied

Answer 10

MICR ink

Magnetic Ink Character Recognition

Question 11

check taken to the bank that is over 6 months old, bank might refuse to accept it

Answer 11

stale dated check

Question 12

What is the difference between a credit card and debit card?

Answer 12

a debit card uses money in your account, a credit card you are borrowing from the bank to pay later

Question 13

a check that is dated later than the date on which it is written

(today is the 29th and you write 31st on date line)

Answer 13

postdated check

Question 14

How do you calculate simple interest?

You borrow $150 for one year with 12% interest rate

Answer 14

Interest = Price x Rate x Time

$150 x 12% x 1 = $18

so if you borrowed $150 you would pay $18 in interest, if you lent $150 then you would have earned $18

Question 15

written evidence that you received payment or that you transferred your right of receiving payment to someone else

Answer 15

endorsement

Question 16

What are the 3 types of endorsements?

Answer 16

1. Blank Endorsement - consists of only the endorser’s name
2. Full / Special Endorsement = endorser transfers check to someone else ‘Pay to the order of…’
3. Restrictive Endorsement - limits the use of the check to the purpose given in the endorsement ‘For deposit only’

Question 17

the rate banks make available to their best business customers, such as large corporations

Answer 17

prime rate

Question 18

What are the compnents of a check?

Answer 18

• Drawer - the owner of the account who signs the check
• Payee - the person to whom the check is written to
• Drawee - the bank or other financial institution that pays the check
• Routing/ABA # - number that identifies the bank
• Account Number - number that identifies owner’s account
• Memo
• Dollar amount
• Date

Question 19

regulates credit unions

Answer 19

The National Credit Union Administration (NCUA)

Question 20

What are some banking services and products?

Answer 20

• Savings Accounts
• regular and interest earning checking accounts
• CD and money market accounts
• safety deposit boxes
• debit cards