W.I.S.E. Review #1

The most liquid type of investment is

• A corporate bond

• A certificate of deposit

• Real estate holding

• A money market account

Answer explanation

The most liquid type of savings is a statement savings account.

You can quickly withdrawal money from it and have no penalties.

Stocks, bonds, and real estate have less liquidity because these investments must be sold before they can be turned into cash.

The greater the liquidity and flexibility, the lower the interest rate paid.

If a person makes a deposit of $10,000 or more into a bank account, the bank must notify the

• US Treasury Department

• Federal Deposit Insurance Corporation (FDIC)

• State Banking Commission

• Federal Reverse Bank

Answer explanation

In order to track large deposits, the federal government requires that deposits of $10,000 or more be reported to the Treasury Department. Some concerns may be that a person might be trying to avoid paying taxes on game winnings or perhaps illegal gains.

Doug wants to buy a car in two months but does not have enough money. What is the best way for Doug to get the money he needs?

• Purchase a certificate of deposit

• Take out a cash loan

• Open a money market account

• Apply for a thirty year mortgage

Answer explanation

In order to get the money now, he could borrow the money by getting a car loan from an automobile dealer, bank, or credit union.

Some people borrow money from family members or friends to buy a car or for the down payment on a car loan.

Patty is selling her car through a newspaper advertisement. When she finds a buyer, she wants a form of payment that is guaranteed to be good. Which form of payment should she avoid?

• Cash

• Certified Check

• Cashiers Check

• A check

Answer explanation

A certified check is a check for which the bank guarantees payment. It is stamped by the bank as certified and becomes an obligation of the bak and the funds to cover it are immediately withdrawn from the depositor's account.

Joan wants to open a checking account and wonders if checking accounts pay interest. How would you answer her question?

• All checking accounts pay interest

• Some types of checking accounts pay interest

• Checking accounts never pay interests

• Checking accounts pay interest if the account balance does not fall below $300.00

Answer explanation

Regular checking accounts do not earn interest. NOW (Negotiable Order of Withdrawal) accounts do earn interest but tend to have higher minimum balance requirements than regular checking accounts and often limit the number of checks that can be written each month without a fee.

Matthew (16) has opened a checking account. He is surprised to find that though he is getting a written bank statement each month he is not getting his cancelled checks returned. Matthew should be aware that the reason should be that the reasons cancelled checks are NOT returned is to

• Protect him from providing opportunities for forgery.

• Insure that he does not receive important materials he is likely to lose.

• Lessen the Banks need to maintain records of check transactions.

• Save the bank money associated with returning copies of these checks.

Answer explanation

The bank must keep the original or copies of all checks written. If the bank does not have to make and mail copies of checks there is a savings of time and money.

You have a checking account balance of $100 and you deposit a personal check of $200 from your brother into your checking account. When will you be able to withdraw $150 cash?

• The same day as the $200 deposit

• 3-7 days later, depending on your banks check clearance policy

• After receiving a checking account statement at the end of the month

• On the day you make your next deposit

Answer explanation

Checks deposited into checking accounts need to be on a deposit for several days before the money can be withdrawn as cash because the check needs to clear.

The best suggestion you gave a friend who is writing a check for the first time is:

• Date the check because it is usually proof of payment

• Use pencil to permit changes

• Make the check payable to cash

• Use the checkbook stub or register to keep a record of the date you write the check

Answer explanation

Date the check because checks are proof of payment. Checks written in pencil or erasable ink can be changed to pay a different payee or amount than the check written in the checkbook register or stub and deduct the amount from your checkbook balance so you know how much money you have left and you can reconcile your checking account against the bank statement. In addition, it is harder for a forger to change the dollar amount if, on the second line, it is printed rather than written in cursive.

Which documents should be stored in a safe-deposit box?

• Checkbook statements

• Copies of current and past budgets

• Current paycheck stubs

• Mortgage loan papers

Answer explanation

The purpose of having a safe deposit box is to have a fireproof, secure place to store valuables to irreplaceable items including legal documents such as a birth certificate and precious jewelry.

Items you would keep in a safe deposit box​ (a)   ​ (b)   ​ (c)   ​ (d)  

• Jewelry
• Paycheck stubs
• Birth Certificate
• Old Checkbook Statements
• Marriage Certificate
• Cash