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Personal Financial Literacy 2nd Edition Jeff Madura, K. Michael Casey, Sherry J. Roberts, Roberts Madura Casey - Solutions
What is the purpose of a check register?a. It automatically balances a person’s checking account.b. A person who balances his own checking account does not have to pay a bank fee for the service.c. A person can keep track of all deposits to and withdrawals from the checking account.d. It protects
Having overdraft protection on a checking account is a good idea but it can also be an expensive feature. Why?a. Banks charge a monthly fee for having overdraft protection on their checking accounts.b. A fee, which can be as high as $25–$30, is charged when overdraft protection on the checking
Why do many people prefer to use a debit card instead of a credit card?a. They can purchase items and have the money withdrawn directly from their account without having to pay interest on a credit card balance.b. They can earn interest on accounts equal to 5% of purchases made with the debit
Why do banks require a person to have a PIN in order to use an ATM?a. They want to know that a person does not have accounts at a competing bank.b. They want to be sure that a person has enough money in the account before writing a check.c. They require the information to update the customer’s
An account into which a person deposits money and then can withdraw funds by making a written order to the bank instructing it to pay money from the account to another person or a business is known as aa. savings account.b. checking account.c. cashier’s account.d. credit account.
Which of the following statements about banks is true?a. All banks in a community charge the same fees for services.b. When one bank raises the interest rate it gives on deposits, all other banks will match that rate of interest.c. ATM fees are not charged when a person uses a bank near his home.d.
Banks do nota. take in and secure people’s money.b. make loans to individuals and businesses.c. pay interest on the money on deposit with the bank.d. sell corporate stock to the public.
Answer the following questions:(a) Describe the process for reconciling your checking account.(b) Why is it important to go through this process each month?(c) How will balancing your checking account each month affect your financial plan?
Each month you will receive a bank statement for your checking account.(a) Describe the process for reconciling your checking account.(b) Why is it important to go through this process each month?(c) How will balancing your checking account each month affect your financial plan?
Present your information to the class in a poster, slide presentation, written report, or other format.
After gathering the information, total each banking institution’s column.
Use the newspaper, Internet, phone book, or other resources to find information about each of the financial institutions your group listed. Gather data about each of your banking services listed. Grade each banking service on a scale of 1–4 (1 being the least desirable and 4 being the most
Design a spreadsheet that includes the following:(a) Column A: Banking services in order of rankings(b) Columns B–D: Three financial institutions in your area(c) Final row: Total score
Rank them in order of importance to you.
List five important banking services to consider when deciding on a financial institution.
Assume Charlene’s checking balance and the bank’s balance were reconciled last month. Using a separate sheet of paper, reconcile the following bank statement against Charlene’s statement. Is there an error somewhere in Charlene’s records? Bank Statement Balance Charlene's Check Register
Susan, a recent college graduate, opened a checking account with a local bank. She asked numerous questions before deciding on this bank, including inquiring about checking account fees and annual credit card fees. When Susan returned from her first vacation in the Bahamas, she was surprised to see
Caleb withdrew $100 from his checking account. However, he used an ATM that was not in his bank’s network. Assuming his bank charges $2 for that service and the bank he used charges $3, how much will his checking account be debited?
Emily logged into her checking account from her computer. She had written three checks for $34.15, $45.98, and $121.15 respectively. Only the last check was posted to her account. How much are her outstanding checks?
Gurinda’s previous checking account balance was $532.14. Since then she has written a check for $46.19 and one for $138.32. She also made a $200 deposit into her account. Assuming her monthly service charge is $6, how much is her new balance?
Ben wrote a check for $52 that was more than his account balance.The bank charges $25 for bounced checks and the local business that accepted his check charges $20 for bounced checks. How much in total would Ben have to pay for that one check?
Jerry has $321,000 in a bank account at his local bank. How much does he stand to lose if the bank goes out of business?
Brandy made a withdrawal of $50 cash from an ATM that was not in her network. Assuming the bank charges $2 for out-of-network withdrawals, how much will her account be charged in total?
Rashaun has $235 in his checking account but has written two checks that have not cleared for $23 and $67.50 respectively. Does he have enough money in his account to make his car payment of$202?
Marvin deposited $400 in his checking account but also wrote checks for $224.21 and $311.34. Assuming his original balance was$622.43, how much does he have in his account now?
(a) What does it mean to say our money is fiat money?(b) How does the existence of fiat money enable the Fed to exercise control over the money supply?
(a) What role does the Fed play in banking?(b) Why do you think it is important for banks across the country to follow similar rules?
(a) Explain the function(s) of the Federal Deposit Insurance Corporation (FDIC).(b) How does the FDIC differ from the National Credit Union Share Insurance Fund (NCUSIF)?(c) What might happen if people did not have confidence in the banking system?
(a) What do cashier’s checks, money orders, and traveler’s checks have in common?(b) What is a circumstance in which you might want to use one of these as opposed to a personal check?
(a) Explain how a debit card differs from a credit card.(b) How might use of a debit card create problems in your checking account?
(a) Describe the steps to follow when balancing your checking account.(b) What might happen if you do not identify a difference between your balance and the bank’s balance?
(a) Explain how a checking account works.(b) What makes a checking account useful compared to an ordinary savings account?
(a) What are some of the benefits offered by depository institutions?(b) How might the economy suffer if there were no banks?
(a) How do depository institutions differ from nondepository institutions?(b) Give an example of each.
What is the difference between a bank draft and an electronic funds transfer?
How does a credit union differ from a bank?
Describe inflation.
What is the main tool the Fed uses to influence the economy?
Why is it important to give people confidence in the safety of their deposits?
Besides checking accounts, what services are typically offered by banks?
Why are checking accounts useful?
What are two types of financial institutions?
Explain the function and goals of the Federal Reserve?
Describe the two major federal insurers?
Identify other available banking services?
Learn the basics of having a checking account, including how to balance an account?
Explain the difference between different types of financial institutions?
If someone uses a ring worth $500 as collateral for a $200 loan, she has most likely obtained a loan from aa. pawnbroker.b. credit card company.c. tax preparer.d. payday lender.
Why is a payday loan considered to be an unwise way to finance a purchase?a. Everyone in the company can go online to see the names of people who have had to take payday loans.b. The person who takes a payday loan will not be eligible for a raise for a year.c. Payday loans carry very high fees
A person who has a total of $17,000 in credit card debt decides to use her house as collateral for a bank loan. She then uses her $30,000 home equity loan to pay off the credit card debt. She is now paying back one larger loan at a lower interest rate. What is the danger of using this method to pay
If a person has mounting credit card debt and cannot pay it down, the first thing she should do isa. contact each credit card company with which she has an account and try to negotiate new terms such as a lower interest rate.b. pay one of the credit card bills each month.c. declare personal
A person with $5,000 in credit card debt with an 18.5% annual interest rate (APR) receives an end-of-year bonus of $2,000. It is generally considered a financially smart move for this person toa. invest the bonus money until he earns $5,000 and can pay off the credit card bill.b. put the money into
What is the advantage to a consumer of having a prepaid cash card?a. Many people never use the cards and the company gets to keep the money.b. The person can purchase items up to the limit on the cash card without paying any interest.c. Cash cards earn monthly interest.d. There is no credit limit
Why would a credit card company offer a person the opportunity to open a credit card account that will charge 0% interest on purchases or balance transfers for 12 months?a. The credit card company expects that the person will continue to make purchases and carry a balance after the introductory
A person knows that she cannot afford to pay $400 for a coat that she really wants. The financially wise action for her to take is toa. buy the coat with a credit card and pay as much as she can each month until it is paid off.b. take a cash advance using her credit card and pay for the coat that
Which of the following is a true statement about credit cards?a. If a person pays her total credit card bill within the grace period, interest on the account is charged at a lower rate.b. If a person uses his credit card to obtain cash advances, there is no interest charged.c. Some credit cards
Which of the following credit card fees is not correctly matched with its description?a. Late-payment fee: charged if a person’s payment is received after the due date.b. Credit-limit-increase fee: charged if a person asks for an increase in his credit limit.c. Balance-transfer fee: charged if a
Even though a person has overdraft protection on her credit card, she should avoid using this feature becausea. overdraft fees can be high, although they cannot exceed the amount of the purchase that caused the overdraft.b. each time a person uses overdraft protection, her credit score will drop by
Which of the following credit card fees is correctly matched with its description?a. Credit limit: the most that can be spent for a single item using a credit card.b. Overdraft protection: the number of purchases that can be made by a person over their credit limit.c. Annual fee: fee that is
How do credit card companies benefit when cardholders pay their bills in full each month and never have to pay interest on balances?a. Credit card companies charge a flat monthly 8% interest even if cardholders pay their bills in full.b. Credit card companies get a higher credit score if
Which of the following is a true statement?a. Creditors require a person to complete a credit application and will conduct a credit check before issuing a credit card.b. Creditors are more likely to loan money when the economy is in a recession.c. Creditors are likely to loan money to people who
Which of the following is not an advantage of having and using a credit card?a. Credit card statements help a person keep track of spending.b. No interest is charged if a minimum payment is made on the account each month.c. A person who is making most purchases with credit cards can see if he is
The greatest advantage of using a credit card is that it providesa. an easy way to establish a personal credit history.b. an easy way to avoid going into debt.c. a less expensive way to pay for college.d. a safe way to improve a person’s credit score.
Which of the following is a true statement about a credit card?a. It must be accepted at any place of business that accepts cash.b. It most often is used to make large purchases such as a car.c. It cannot be used to make purchases under $10.d. It allows a person to make purchases wherever the card
A financial tool that provides people with revolving open-end access to funds that they can draw from repeatedly up to some preset limit is known as aa. mortgage.b. certificate of deposit.c. credit card.d. checking account.
Brainstorm all the advantages and disadvantages of credit card use. Using the Interent, research various credit card companies and identify all their features. Report back to the class your findings and make comparisons.
A classmate has come to you with a credit card application. The excitement of having credit is too much and you are asked to help with advice. Write a short essay that explains to your friend how credit cards work and how to use them carefully so that they are an advantage, not a hindrance, to
In teams, look up the four leading cell phone providers in your surrounding area. Make a chart that compares the costs, features, services available, call area, and any other interesting facts. Present your information on a poster that can be displayed in the halls of your school for students to
Look at the following chart. It shows several situations for someone who has a $2,000 credit card balance and who charges $150 or $100 each month. You can use an online calculator to determine for each scenario how long it would take to pay off the balance and how much interest you would pay in the
Chen recently graduated from college and accepted a job in a new city.Furnishing his apartment had proven more costly than he anticipated.To assist him with making purchases, he applied for and received a credit card with a $5,000 credit limit. Chen planned to pay off the balance over six
Jerry pawned his power tools valued at $800 for $450 cash.Assuming he pays the pawnbroker $40 a month for three months and then pays the balance and retrieves his tools, what was the approximate annual interest rate for this loan?
In the previous question, assuming Jim pays the minimum payment next month on each card and that is 3% of the outstanding balance, how much will Jim’s payments be?
Jim has four credit cards with limits of $4,000, $9,000, $3,600, and$11,300 respectively. If he has all of his cards charged up to 85% of his credit limit, how much does he owe?
If a vendor makes a credit sale of $238.49, how much will the vendor receive after it pays the customary 3% fee to the credit card company?
Assume you carry a $1,000 balance on your credit card that charges a 24% annual interest rate. How much interest will you pay for this account next month?
Kari got a $50 cash advance at a local out-of-network ATM. She paid the $55 balance in full when the bill came in. Kari’s bill included the $50 cash advance and $5 in fees. Approximate the annual interest rate that Kari paid for this advance. Remember that these charges represent only one month
Reshawda used her Visa card to put $30 worth of gas in her car.However, when she got her bill she noticed the charge put her over her credit limit. Assuming the credit card company charges her a$25 over-limit charge, how much did the gas actually cost her?
Paula’s mom just sold a new prom dress in her shop for $675.However, the customer paid for the dress with a MasterCard.Assuming Paula’s mom receives 97% of the sale after paying a 3%credit card fee, how much will she actually receive from the sale?
(a) How does the financial obligation of consumers to cell phone plans differ from that to landline telephone service?(b) What, besides money, is the major threat from misuse of a cell phone plan?
(a) What is a tax refund loan?(b) How is it similar to and different from a payday loan?
(a) What is payday lending?(b) If you had the option of using a standard credit card for a $500 purchase or a payday loan, which would you choose? Why?
(a) Why is paying your credit card balance in full important?(b) What should you do if you can’t avoid credit card debt? Explain.
(a) Are all credit cards the same in their use and features?(b) Explain which features you would find particularly useful.
(a) What is a grace period?(b) How can this feature enable you to use a credit card at no direct cost to you?
(a) What is the purpose of overdraft protection?(b) Explain how using this feature may both help and hurt you.
(a) What is a credit limit?(b) How can you use the credit limit to determine how much credit you can safely use?
(a) What kinds of information are creditors looking for?(b) Do you need to have all these attributes to get credit?
(a) What are two advantages of using a credit card?(b) What is a disadvantage?(c) How does credit from a credit card differ from a personal loan?
What is the difference between a cash advance from a payday lender and money received from a pawnbroker?
What is meant by debt consolidation?
What happens when a person declares bankruptcy?
What are some examples of other risky types of credit?
What is the main rule for using credit cards wisely?
Identify five key features of a credit card.
What can a consumer do with a credit card?
Identify other risky credit arrangements?
Discuss how to use a credit card correctly?
Describe different credit card features?
Explain how credit cards work?
A disadvantage of paying for a car with a long-term loan is thata. the monthly loan costs are higher than the same loan taken for a shorter time.b. the person cannot take possession of the vehicle until at least half of the loan has been paid.c. toward the end of the loan, it is possible to owe
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