When a check is made payable to cash, it

creates a check that anyone can cash

A 17 yr old deposits a check from a different state into their checking account. Funds are NOT immediately available

because out-of-state checks may take longer to clear through the Fed

Banks can use money from depositors to

give loans to consumers and businesses

A person transfers $300 a month from their checking account to a creditor for a loan payment. This is an example of

an electronic funds transfer (EFT)

A person wants to know if the must pay taxes on the interest they earned on their saving account. The IRS would say?

Interest earned that is more than $10 is income and is taxable

What action can the Federal Reserve System (Fed) take to stimulate the economy during a recession?

Lower short-term interest rates

A cashier’s check is a check that is

issued to the payee and guaranteed by the bank

One benefit of establishing a College Savings 529 Plan is that the money

set aside for educational expenses can be invested

A financial institution will continue to pay out money for the checks a person writes if

there is enough money in their account to cover the amount of the checks

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BANKING W!SE Financial Literacy Practice Test

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Questions 15

Answers

1
When a check is made payable to cash, it
does not allow the check to be deposited
creates a check that anyone can cash
voids the check
restricts the life of the check to no more than 5 days
2
A person should shred all personal documents that are no longer needed in order to prevent
redlining
harassment
phishing
identity theft
3
All of the following are good reasons to have a bank savings account EXCEPT that funds deposited in savings accounts
earn high dividends
grow in value because of interest
are liquid
are insured up to the legal limit
4
A 17 yr old deposits a check from a different state into their checking account. Funds are NOT immediately available
because the check was deposited in an ATM
because out-of-state checks may take longer to clear through the Fed
because the FDIC requires six months to clear out-of-state checks
because the person who endorsed the check was under the age of 18
5
Banks can use money from depositors to
pay expenses for the Federal Reserve System
give loans to consumers and businesses
make their services and products attractive for new depositors
pay for employee special projects
6
A person transfers $300 a month from their checking account to a creditor for a loan payment. This is an example of
an electronic funds transfer (EFT)
a credit card transaction
an ATM transaction
an Installment purchase
7
The following are usually required to open a personal bank account EXCEPT
proof of residence
a valid driver’s license or passport ID
a Social Security number or business ID number
a high school diploma
8
A person wants to know if the must pay taxes on the interest they earned on their saving account. The IRS would say?
A sales tax will be charged on the interest earned
If the interest earned is under $50, it is not taxable
Interest earned that is more than $10 is income and is taxable
Interest earned on savings accounts and checking accounts is not taxable
9
What action can the Federal Reserve System (Fed) take to stimulate the economy during a recession?
Keep short-term interest rates the same and lower long-term rates
Lower short-term interest rates
Keep short-term interest rates the same and raise long-term interest rates
Raise short-term interest rates
10
In order to make a deposit into a personal bank account, a person can do all of the following EXCEPT depositing
a check electronically
a check using a bank ATM
funds with a bank teller
funds at a check cashing store
11
The term used to describe the ease and speed with which a financial product can be converted to cash is
rate of return
principal
convenience
liquidity
12
A cashier’s check is a check that is
easily cashed if lost or stolen
issued to the payee and guaranteed by the bank
issued by someone with a checking account
a loan used for making large and needed purchases
13
One benefit of establishing a College Savings 529 Plan is that the money
in the account is taxed as part of the student’s income each year
must be paid back into the 529 account within 2 years after graduation
in the account will be matched by the college attended
set aside for educational expenses can be invested
14
Which of the bank products listed below will generally earn the most interest?
A credit card
A certificate of deposit
A savings account
A checking account
15
A financial institution will continue to pay out money for the checks a person writes if
they keep a record of checks written
the money in the account has been on deposit for more than 30 days
there is enough money in their account to cover the amount of the checks
they have a good credit score

BANKING W!SE Financial Literacy Practice Test Flashcards | StudBud