Bank Management Test: Managing and Pricing Deposit Services

Topics: Banking, Deposit account, Cheque Pages: 24 (5387 words) Published: April 14, 2013
Chapter 12
Managing and Pricing Deposit Services

Fill in the Blank Questions

1.A(n) _________________________ requires the bank to honor withdrawals immediately upon request. Answer: demand deposit

2.A(n) _________________________ is an interest bearing checking account and gives the bank the right to insist on prior notice before customer withdrawals can be honored. Answer: Negotiable order of withdrawal (NOW)

3.A(n) _________________________ is a short-maturity deposit which pays a competitive interest rate. Only 6 preauthorized drafts per month are allowed and only 3 of these can be by check. Answer: money market deposit account

4._________________________ are designed to attract funds from customers who wish to set aside money in anticipation of future expenditures or financial emergencies. Answer: Thrift deposits

5._________________________ are the stable base of deposited funds that are not highly sensitive to movements in market interest rates and tend to remain with a depository institution. Answer: Core deposits

6.Some people feel that everyone is entitled access to a minimum level of financial service no matter their income level. This issue is called the issue of _________________________. Answer: basic (lifeline) banking

7._________________________ is a way of pricing deposit services in which the rate or return or fees charged on the deposit account are based on the cost of offering the service plus a profit margin. Answer: Cost plus pricing

8.When financial institutions tempt customers by paying postage both ways in bank-by-mail services or by offering free gifts such as teddy bears, they are practicing ___________. Answer: nonprice competition

9.The _________________________is the added cost of bringing in new funds. Answer: marginal cost

10._________________________ pricing is where the financial institution sets up a schedule of fees in which the customer pays a low or no fee if the deposit balance stays above some minimum level and pays a higher fee if the balance declines below that minimum level. Answer: Conditional

11.When a customer is charged a fixed charge per check this is called __________________ pricing. Answer: flat rate

12.When a customer is charged based on the number and kinds of services used, with the customers that use a number of services being charged less or having some fees waived, this is called __________________ pricing. Answer: relationship

13._________________________ is part of the new technology for processing checks where the bank takes a picture of the back and the front of the original check and which can now be processed as if they were the original. Answer: Check imaging

14.A(n) _________________________ is a thrift account which carries a fixed maturity date and generally carries a fixed interest rate for that time period. Answer: time deposit

15.A(n) _________________________ is a conditional method of pricing deposit services in which the fees paid by the customer depend mainly on the account balance and volume of activity. Answer: deposit fee schedule

16.The _________________________ was passed in 1991 and specifies the information that institutions must disclose to their customers about deposit accounts. Answer: Truth in Savings Act

17.The _________________________ must be disclosed to customers based on the formula of one plus the interest earned divided by the average account balance adjusted for an annual 365 day year. It is the interest rate the customer has actually earned on the account. Answer: annual percentage yield (APY)

18.A(n) _________________________ is a retirement plan that institutions can sell which is designed for self-employed individuals. Answer: Keogh plan

19.Deposit institution location is most important to...
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