Personal Finance University of Utah
Exam 2 CHP 5-7
Higher Return on Savings will usually equal less liquidity T/F - Answer TRUE
A "free" checking account with a minimum balance of $500 has an opportunity cost of
lost Interest T/F - Answer TRUE
A certificate of deposit is usually considered to be very liquid T/F - Answer FALSE
The more frequent the compounding, the less a person will earn on a savings account -
Answer FALSE
Joan Zemke expects interest rates to decline over the next few months. To maximize
her earnings she should use a ? - Answer Five-year certificate of deposit
When interest rates are rising, a person would be best served by ? - Answer A SHORT
TERM savings investment
Which of the following statements regarding debit and credit card liabiltiy are
CORRECT? - Answer A debit card carries more risk of loss to the cardholder
To avoid high fees for loans, a person should avoid borrowing from a ? - Answer
Pawnshop
A certificate of deposit usually has? - Answer Limited Liquidity
The rate of return on a savings account is also referred to as ? - Answer Yield
A $200 savings that earns $13 in interest in year has a yield of ? - Answer 6.50%
Savings compounded _______ would have the highest effective yield - Answer daily
The Truth-in-Savings law requires the financial institutions..... - Answer report annual
percentage yields on daily savings
Comparison of earnings for different savings plans can best be accomplished using
the....? - Answer Annual Percentage Yield
Which of the following is an effective strategy in times of FALLING interest rates? -
Answer Use short terms goals to take advantage of lower rates when you refinance the
loans
A personal check with guaranteed payment is called a ? - Answer certified check
, Which of the following institutions makes loans based on the values of tangible
possessions, such as jewelry and collectables - Answer Pawnshops
What type of account would be considered the most liquid? - Answer Checking Account
A pawnshop with a monthly interest rate of 2.75 percent would have an annual
interest rate of ____ percent. Ignore compounding. - Answer 33 (2.75 x 12 months =
33.0)
A person borrows $200 from a payday loan company, and pays $10 interest for two
weeks. This would result in an annual interest rate of approximately ___ percent. Ignore
compounding. - Answer 130 ($10 x 26 weeks = $260; $260/$200 = 1.3 or 130%)
A savings account earns 4 percent. If the saver is in a 28 percent tax bracket, the
after-tax savings rate of return would be ____ percent. - Answer 2.88 (4 % x 1-.28 =
2.88%)
Credit is an arrangement to receive cash, goods, or services now and pay for them in
the future. - Answer TRUE
Consumer credit refers to the use of credit for personal needs (except a home
mortgage) by individuals. - Answer TRUE
Most consumers have only one choice in financing current purchases. - Answer FALSE
Credit when effectively used, can help you have more and enjoy more - Answer TRUE
Perhaps the greatest disadvantage of using credit is the temptation to overspend. -
Answer TRUE
With an open-end credit, you pay back one-time loans in a specified period of time
in equal amounts. - Answer FALSE
Interest is a periodic charge for the use of credit, or other finance charges. - Answer
TRUE
You should sign your new credit cards as soon as they arrive. - Answer TRUE
The debt payments-to-income ratio is calculated by dividing your total liabilities by your
net worth. - Answer FALSE
When you cosign a loan, you are being asked to guarantee this debt. - Answer TRUE
Credit bureaus obtain their data from banks, finance companies, merchants, credit card
companies, other creditors, and court records. - Answer TRUE
Exam 2 CHP 5-7
Higher Return on Savings will usually equal less liquidity T/F - Answer TRUE
A "free" checking account with a minimum balance of $500 has an opportunity cost of
lost Interest T/F - Answer TRUE
A certificate of deposit is usually considered to be very liquid T/F - Answer FALSE
The more frequent the compounding, the less a person will earn on a savings account -
Answer FALSE
Joan Zemke expects interest rates to decline over the next few months. To maximize
her earnings she should use a ? - Answer Five-year certificate of deposit
When interest rates are rising, a person would be best served by ? - Answer A SHORT
TERM savings investment
Which of the following statements regarding debit and credit card liabiltiy are
CORRECT? - Answer A debit card carries more risk of loss to the cardholder
To avoid high fees for loans, a person should avoid borrowing from a ? - Answer
Pawnshop
A certificate of deposit usually has? - Answer Limited Liquidity
The rate of return on a savings account is also referred to as ? - Answer Yield
A $200 savings that earns $13 in interest in year has a yield of ? - Answer 6.50%
Savings compounded _______ would have the highest effective yield - Answer daily
The Truth-in-Savings law requires the financial institutions..... - Answer report annual
percentage yields on daily savings
Comparison of earnings for different savings plans can best be accomplished using
the....? - Answer Annual Percentage Yield
Which of the following is an effective strategy in times of FALLING interest rates? -
Answer Use short terms goals to take advantage of lower rates when you refinance the
loans
A personal check with guaranteed payment is called a ? - Answer certified check
, Which of the following institutions makes loans based on the values of tangible
possessions, such as jewelry and collectables - Answer Pawnshops
What type of account would be considered the most liquid? - Answer Checking Account
A pawnshop with a monthly interest rate of 2.75 percent would have an annual
interest rate of ____ percent. Ignore compounding. - Answer 33 (2.75 x 12 months =
33.0)
A person borrows $200 from a payday loan company, and pays $10 interest for two
weeks. This would result in an annual interest rate of approximately ___ percent. Ignore
compounding. - Answer 130 ($10 x 26 weeks = $260; $260/$200 = 1.3 or 130%)
A savings account earns 4 percent. If the saver is in a 28 percent tax bracket, the
after-tax savings rate of return would be ____ percent. - Answer 2.88 (4 % x 1-.28 =
2.88%)
Credit is an arrangement to receive cash, goods, or services now and pay for them in
the future. - Answer TRUE
Consumer credit refers to the use of credit for personal needs (except a home
mortgage) by individuals. - Answer TRUE
Most consumers have only one choice in financing current purchases. - Answer FALSE
Credit when effectively used, can help you have more and enjoy more - Answer TRUE
Perhaps the greatest disadvantage of using credit is the temptation to overspend. -
Answer TRUE
With an open-end credit, you pay back one-time loans in a specified period of time
in equal amounts. - Answer FALSE
Interest is a periodic charge for the use of credit, or other finance charges. - Answer
TRUE
You should sign your new credit cards as soon as they arrive. - Answer TRUE
The debt payments-to-income ratio is calculated by dividing your total liabilities by your
net worth. - Answer FALSE
When you cosign a loan, you are being asked to guarantee this debt. - Answer TRUE
Credit bureaus obtain their data from banks, finance companies, merchants, credit card
companies, other creditors, and court records. - Answer TRUE
