Business Concepts Review Chapter 17 True/False Indicate whether the sentence or statement is true or false. ____ 1. All state and national banks are required to join the Federal Reserve System. ____ 2. Banks are prohibited from lending all of the money they receive from customers. ____ 3. The most common way for a bank to be organized is as a mutual savings bank. ____ 4. Banks sometimes charge depositors fees for certain services, such as using an ATM or having a checking account. ____ 5. Not even the bank has the right to open your safe-deposit box. ____ 6. Most banks charge a fee for each check written on a regular checking account. ____ 7. If you lose your debit card, your liability for unauthorized use is only $50 if you notify your financial institution within two days of the loss. ____ 8. Most financial analysts do not expect much further change in the way Americans use banks and money. ____ 9. A blank endorsement makes a check payable to anyone who has the check. ____ 10. A canceled check is a check that has been paid by the bank. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 11. The paying of checks among different banks in different cities is called a. clearing. b. reserving. c. kiting. d. bouncing. ____ 12. Which of the following is NOT a deposit institution? a. mutual savings bank b. commercial bank c. check cashing outlet d. savings and loan association ____ 13. Mutual savings banks are organized mainly for a. business loans. b. check cashing. c. automobile loans. d. savings and home loans. ____ 14. This non-deposit financial institution specializes in making loans for long-lasting or durable goods, such as cars and refrigerators, and for financial emergencies. a. consumer finance company b. pawnshop c. credit union d. investment company ____ 15. The FDIC insures all accounts in the same name at each bank up to an amount of a. $1,000. b. $10,000. c. $100,000. d. $1,000,000. ____ 16. Almost ____ percent of U.S. banks are FDIC members. a. 50 b. 75 c. 90 d. 99 ____ 17. Alexi is looking for a new bank. He is most concerned with finding a bank that offers 24-hour banking services. He is most concerned with a. safety. b. convenience. c. fees. d. restrictions. ____ 18. You can store valuables at a bank by purchasing the use of a a. post office box. b. padlock box. c. strongbox. d. safe-deposit box. ____ 19. Bonita writes many checks each month. Which type of checking account is probably the best choice for her? a. interest-earning checking account b. activity checking account c. regular checking account d. special checking account ____ 20. An interest-earning checking account a. usually requires a lower monthly balance than regular checking accounts. b. generally pays very high interest rates. c. is a good choice if you are depositing a large amount of money. d. usually earns interest only if the account stays above the required amount. ____ 21. Typical e-banking services allow customers to do all of the following EXCEPT a. obtain cash. b. transfer funds from savings to checking. c. print new checks. d. pay bills online. ____ 22. You use a ____ card for ATM transactions. a. debit b. credit c. smart d. stored-value ____ 23. With ____, the bank deducts payments from your account and transfers them to the appropriate companies. a. direct deposit b. automatic bill payment c. credit cards d. automatic teller machines ____ 24. When you use a debit card in a store or restaurant, a. you sign a receipt, similar to when you use a credit card. b. you are asked to provide your PIN, similar to when you use a cash machine. c. both a and b d. neither a nor b ____ 25. When you put money into your checking account, you will fill out a a. check stub. b. check register. c. signature card. d. deposit slip. ____ 26. Zack has endorsed a check by writing “For deposit only” above his signature. This is a a. restrictive endorsement. b. blank endorsement. c. full endorsement. d. special endorsement. ____ 27. The person to whom a check is written is the a. drawer. b. payee. c. endorser. d. drawee. ____ 28. All of the following are improper check writing procedures EXCEPT a. overdraw your account whenever possible. b. avoid making checks payable to “Cash.” c. write your checks in pencil. d. postdate all of your checks. ____ 29. A personal check for which a bank has guaranteed payment is called a a. banker’s check. b. cashier’s check. c. certified check. d. traveler’s check. ____ 30. This type of money order is typically issued by travel agencies, supermarkets, pharmacies, and convenience stores. a. express money order b. bank money order c. postal money order d. telegraphic money order Completion Complete each sentence or statement. 31. The Federal ____________________ System supervises and regulates member banks and helps banks serve the public efficiently. 32. Commercial banks are often called ____________________-service banks because they offer a wide range of financial services. 33. A user-owned, not-for-profit cooperative financial institution is called a(n) ____________________ union. 34. A(n) ____________________ makes loans based on the value of some tangible object, such as jewelry or other valuable items. 35. The Federal Deposit ____________________ Corporation protects depositors’ money in case of the failure of a bank or financial institution it regulates. 36. Electronic funds ____________________ refers to the use of computers and other technology for banking activities. 37. When customers ask banks the manage investments on their behalf, the money or property that is turned over for the bank to manage is said to be held in ____________________. 38. A bank charges a fee called a(n) ____________________ charge for handling many checking accounts. 39. If you write only a few checks each month, you should consider a(n) ____________________ checking account. 40. In a point-of-____________________ transaction, a merchant accepts a debit card to pay for purchases. 41. A(n) ____________________ is written evidence that you received payment or that you transferred your right of receiving payment to someone else. 42. A check ____________________ is a separate book, usually the same size as your checkbook, in which you can record account activities. 43. A(n) ____________________ payment order is a written notice that tells the bank not to pay a certain check. 44. Checks that have not yet been deducted from your bank statement balance are called ____________________ checks. Short Answer 45. How do non-deposit financial institutions earn their money? Name at least three common non-deposit financial institutions. 46. What are the four basic types of banking services most people use? 47. Under what circumstances might someone use a trust? 48. What is meant by reconciling a bank balance? How do you reconcile a checking account? Business Concepts Review Chapter 17 Answer Section TRUE/FALSE 1. ANS: F 2. ANS: T 3. ANS: F 4. ANS: T 5. ANS: T 6. ANS: F 7. ANS: T 8. ANS: F 9. ANS: T 10. ANS: T MULTIPLE CHOICE 11. ANS: A 12. ANS: C 13. ANS: D 14. ANS: A 15. ANS: C 16. ANS: D 17. ANS: B 18. ANS: D 19. ANS: C 20. ANS: D 21. ANS: C 22. ANS: A 23. ANS: B 24. ANS: C 25. ANS: D 26. ANS: A 27. ANS: B 28. ANS: B 29. ANS: C 30. ANS: A COMPLETION 31. ANS: Reserve 32. ANS: full 33. ANS: credit 34. ANS: pawnshop 35. ANS: Insurance 36. ANS: transfer 37. ANS: trust 38. ANS: service 39. ANS: special activity 40. ANS: sale 41. ANS: endorsement 42. ANS: register 43. ANS: stop 44. ANS: outstanding SHORT ANSWER 45. ANS: Non-deposit financial institutions earn their money by selling specific services or policies? Common non- deposit financial institutions include life insurance companies, investment companies, consumer finance companies, mortgage companies, check-cashing outlets, and pawnshops. 46. ANS: The four basic types of banking services most people use are (1) savings accounts, (2) checking and payment accounts, (3) loans and other credit plans, and (4) services such as safe deposit boxes, trusts, and investment advice. 47. ANS: Trusts are especially useful for very young people and for some elderly people. A young person who inherits money may not have the skill and experience to manage it wisely. Elderly people who are ill may ask the trust department of a bank to manage their money. 48. ANS: Bringing your own checking account balance into agreement with the bank’s record of your account (the bank statement) is called reconciling the bank balance. To reconcile a checking account (1) subtract the total of outstanding checks from the bank statement balance; (2) add any deposits in transit to the balance statement balance; (3) subtract service charges and other pertinent fees; (4) add any interest earned to your check register balance.
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