Unit 8: Banking & Borrowing Study Guide

What are the 3 functions of money?

• Medium of exchange, unit of account, store of value

• Medium of exchange, unit of account, measure of wealth

• Store of value, measure of wealth, unit of account

• Medium of exchange, measure of wealth, store of value

Which of the following is NOT one of the 6 characteristics of money?

• Complexity

• Divisibility

• Portability

• Uniformity

• Durability

What is a Payday lender? Give a pro and con of using their services.

• A financial institution that offers long-term loans with low interest rates. Pro: Easy to obtain; Con: High interest rates.

• A financial institution that offers short-term loans with high interest rates. Pro: Quick access to cash; Con: High interest rates.

• A financial institution that offers investment advice. Pro: High returns; Con: Risk of loss.

• A financial institution that offers savings accounts with high interest rates. Pro: Safe investment; Con: Limited access to funds.

What is a Credit Union? Give a pro and con of using their services.

• A financial institution owned by its members, offering lower fees and better interest rates, but with limited accessibility and fewer services compared to banks.

• A government-owned bank offering high-interest savings accounts and extensive branch networks.

• A private investment firm focusing on high-risk, high-reward financial products.

• A non-profit organization providing free financial advice and education.

What is a Title Pawn Lender? Give a pro and con of using their services.

• A Title Pawn Lender provides loans using a vehicle title as collateral. Pro: Quick access to cash; Con: High interest rates.

• A Title Pawn Lender provides loans using a property deed as collateral. Pro: Low interest rates; Con: Long approval process.

• A Title Pawn Lender provides loans using a credit score as collateral. Pro: No collateral needed; Con: Requires good credit.

• A Title Pawn Lender provides loans using a personal guarantee. Pro: Flexible terms; Con: Risk of losing personal assets.

Commercial Banks make most of their money because of their “Spread”. What is “spread”?

• The difference between the interest rate banks pay on deposits and the interest rate they charge on loans.

• The total amount of loans a bank has issued.

• The number of branches a bank has.

• The amount of money a bank holds in reserves.

What is the best way to avoid paying interest on your credit card?

• Pay the minimum amount due each month

• Pay the full balance each month

• Transfer the balance to another card

• Use the card only for emergencies

Which of the following is a pro of using cash as a method of payment?

• It helps in building credit history.

• It is widely accepted and provides anonymity.

• It offers rewards and cashback.

• It allows for online transactions.

How does your credit score affect how high or low your interest rates are?

• A higher credit score generally leads to lower interest rates.

• A higher credit score generally leads to higher interest rates.

• Credit score does not affect interest rates.

• Interest rates are only affected by income level.

Which financial institution has the highest interest rates?

• Bank

• Credit Union

• Payday Lender

• Title Pawn