Question

1. You are 26 years old, married, and have two small children. You have a household income (take-home pay) of $3,500 per month and currently rent your home. You have and pay many bills, and make many purchases (usually by debit card) each month. You often lose track of spending and end up paying unnecessary bank fees. You would like to buy a new car in five months and a new home in two years. To avoid overdrafts, you chose "opt-in" overdraft protection with your bank. You just received your bank statement, which states a balance of $691, while your check register says you have a balance of $800. Which of the following accounts would be best for?

Purpose Type of accountA) Satisfying your day-to-day spending needs? ___________ B) Making and holding funds for your car purchase? ___________C) Making and holding funds for your home purchase? ___________D) Making and holding funds for your retirement?
A. Stock and bond portfolio.
B. NOW account.
C. NOW account.
D. Mutual funds.
2. Which of the following accounts is typically not insured?A. Mutual Funds.B. NOW account.
C. Certificate of deposit.
D. Statement savings account.
3. Which of the following practices would help you keep accurate records regarding the funds in your bank account?
A. Keep track of your balance online.B. Immediately record the date and amount of each transaction in your check register and calculate the new balance.C. Wait for the printed bank statement to arrive in the mail to know what payments and receipts have cleared your account.4. You can avoid a service fee on an average-balance account if you:______.
A. Issue a stop-payment order when you find yourself overdrawn.B. Keep a certain average daily balance in the account through a specified time.C. Avoid an overdraft for a specified time.D. Have your paycheck automatically deposited into your account each pay period.

Answer 1

1. A) Satisfying your day-to-day spending needs?

Statement Savings account

Bank statements will hep you keep track of the balance.

B) Making and holding funds for your car purchase?

NOW Account.

An account that earns interest yet allows the owner to write drafts against the money in the account. This would be good here as it will increase the funds you are saving for the car purchase.

C) Making and holding funds for your home purchase?

NOW Account.

NOW stands for Negotiable Order of Withdrawal account and would work here as well.

D) Making and holding funds for your retirement?

Certificate of Deposit.

These are offered by banks and earn a higher interest return. They however have to be locked up for a while without withdrawing so they are great for retirement saving.

2. Which of the following accounts is typically not insured?

A. Mutual Funds.

Mutual funds are not financial deposits so will not be covered by the Federal Deposit Insurance Corporation (FDIC).

3. Which of the following practices would help you keep accurate records regarding the funds in your bank account?

• A. Keep track of your balance online.
• B. Immediately record the date and amount of each transaction in your check register and calculate the new balance.

4. You can avoid a service fee on an average-balance account if you:

• B. Keep a certain average daily balance in the account through a specified time