80 NOT Answered Yet Test Questions:
(hold on, will be updated soon)1. Which of the following is a characteristic of a certificate of deposit?
Answers:
• You have to earn at least $100,000 in salary to be allowed to buy a CD
• It is just a different name for a savings account
• It requires that the funds be kept in the account for a minimum fixed period of time e.g. 90 days
• Only large banks offer them
2. Would a bank be allowed to pay someone from a personal account without a mandate from the customer?
Answers:
• No, not without a check drawn against the account by the account holder
• Yes, but only to government entities
• Yes, if someone presents a written note in good faith to pay them
• Yes, because banking is fairly unregulated
3. What would a person do if they wanted to have the facility to save money as well as issue checks?
Answers:
• They can only have one or the other facility
• Open both a savings and a checking account with the same bank
• Open a savings account with one bank, and a checking account with another
• Not use a bank at all
4. What does the term "Availability Float" imply?
Answers:
• The banking hours of your local bank
• The period of time it takes a check to be cleared
• A limit on how long a check is good for before it becomes invalid
• The time period or the amount represented by checks that have been deposited but not cleared
5. What is the ratio of bank reserves to bank deposits called?
Answers:
• Deposit multiplier
• Deposit schedule
• Reserve ratio
• Reserve/Deposit ratio
6. What is meant by the term "Redemption"?
Answers:
• Cashing in a bond coupon
• Receiving interest on a loan
• Opening a secondary bank account
• Paying off a mortgage loan in full
7. How is a savings account different from a certificate of deposit?
Answers:
• Savings accounts are only at banks, cd's are only at credit unions
• Savings accounts can be added to or withdrawn from at any time, CDs can not be
• Savings accounts are for anyone, cd's are only for rich people
• Savings accounts are required by anyone having a checking account, CDs are not
8. What is the signing of a check on its back by the payee referred to as?
Answers:
• Writing the check
• Indorsing the check
• Cashing the check
• Monopolizing the check
9. What is the process which the Federal Reserve uses to influence the availability and cost of money and credit called?
Answers:
• Credit policy
• Monetary policy
• Credit rating
• Federal reserve system
10. Why is a negotiable instrument a "special contract"?
Answers:
• Because nobody has to sign it
• Because it is always only for services, not goods
• Because there is no date written on it
• Because it does not include the typical requirements of a contract such as offer, acceptance and consideration
11. What does the term "Debenture" imply?
Answers:
• A long term loan at prime market rate
• A loan for the purchase of securities
• A short term loan at an adjustable rate
• A long term loan to a company, usually at a fixed rate of interest and for a specific term
12. How do banks offer services to all levels and types of individuals and still earn money?
Answers:
• By sending potentially risky customers to other banks
• By finding ways to exploit the rich customers to subsidize the poor ones
• By having a variety of account types and fee structures offering something to everyone
• By being exclusive and catering only to high net worth individuals
13. Which of the following is a requirement that a bank has to comply with?
Answers:
• Minimum number of customers
• Minimum number of employees
• Minimum salaries
• Minimum capital
14. Which of the following is a feature often found in an offshore bank account, not usually found in an onshore bank account?
Answers:
• Debit cards
• Facility to write checks
• Unnamed accounts
• Wire transfer ability
15. What is meant by the term Retail Banking?
Answers:
• Banking institutions executing transactions with companies
• Banking institutions executing transactions with foreign countries
• Banking institutions executing transactions with consumers
• Banking institutions executing transactions with other banks
16. What is another name for a bill of exchange?
Answers:
• A savings account
• A checking account
• A certificate of deposit
• A check
17. Why are offshore banks often able to offer a client higher interest rates?
Answers:
• Lower cost structure allows them to pay higher interest rates
• They give away all of their earnings to their clients
• They steal money from other clients to pay higher interest
• Their laws require them to pay higher rates
18. What is the government entity that insures bank balances?
Answers:
• SEC
• FDIC
• IRS
• GAAP
19. What is meant by "restrictive endorsement"?
Answers:
• Merely signing a check
• Indorsing a check with terminology limiting how the funds can be applied
• Writing a check out to a specific person
• Presenting a check to a bank
20. What are the four requirements for a promissory note to be legal?
Answers:
• An unconditional order, a specific amount, being payable to a specific person, being payable on a specific date
• Being payable to a specific person, being payable on a specific date, that both parties belong to the same bank, being payable in US currency
• A specific amount, being payable to a specific person, only in U.S. funds, for a specific good or service
• An unconditional order, being payable to a group of people, being payable on any given day in a 30 day time frame and for a specific amount
21. How is a money market account different from a savings account?
Answers:
• Only rich people are allowed to have money market accounts
• Money market accounts are offered only by national banks, not by local banks
• Money market accounts always require some monthly fee, savings accounts do not
• A money market account earns a higher interest rate and typically has a limit on the number of transactions each month
22. Which of the following is not covered by the FDIC?
Answers:
• A checking account
• Money market funds
• A savings account
• IRA
23. What does the term "Ex Gratia Payment" mean?
Answers:
• An extra payment made during a month on a bank loan
• An extra interest payment made by the bank to customers
• A late payment on a loan
• Any payment made to an insured party for which an insurance company had no formal liability
24. What is the payment that people receive after a mishap which leaves them in the same financial position as they were in before they suffered the loss called?
Answers:
• Default
• Collateral
• Indemnity
• Back pay
25. What type of account would someone who wants the facility to pay people through checks open?
Answers:
• A savings account
• A checking account
• A money market account
• A stock account
26. What amount would someone who has $500,000 in one bank and $250,000 in another bank be insured for in total?
Answers:
• $500,000: $500,000 from one bank and nothing from the other
• $500,000: $250,000 from each bank
• $250,000 in total regardless of the number of banks
• $250,000 in total as the smaller deposit is the only one covered
27. What method would a consumer most likely use to move funds between their offshore account and their domestic account?
Answers:
• Mail cash
• Wire transfer
• Fly to the offshore country and withdraw it in person
• Go to the local branch of the offshore bank
28. Which of the following would not be covered by the FDIC?
Answers:
• Checking accounts
• Joint savings accounts
• IRA
• U.S. Government investments such as treasury bills
29. What level will the FDIC insure any one person at a bank for beginning January 1, 2010?
Answers:
• $50,000
• $100,000
• $250,000
• $1,000,000
30. What is the definition of an offshore bank?
Answers:
• A bank located in a different state
• A virtual bank with no physical location
• A bank which only offers checking and no other services
• A bank located outside the country of the depositor, usually in a lower tax jurisdiction
31. What was the purpose of the 2006 Deposit Insurance Fund?
Answers:
• To replace the FDIC
• To merge the two earlier funds namely the Bank Insurance Fund and the Savings Associations Insurance Fund
• To reduce consumer taxes on investment gains
• To promote the idea that consumers should be saving money
32. Why can't anyone start a new bank?
Answers:
• The government allows only one new bank per year
• There is a limit on the number of banks allowed to be opened
• There is a freeze on opening new banks
• It is a regulated industry and a license is required before opening a new bank
33. What is a secondary way through which banks earn money?
Answers:
• By selling memberships
• Through ad revenue from their site
• By paying lower interest on deposits and charging higher interest on advances
• By charging fees on accounts
34. What does the term "Netting" mean?
Answers:
• Bringing in new customers to a bank
• Paying interest on an outstanding loan
• Combining an individual's bank accounts into one
• The offsetting with a counterparty or counterparties of financial obligations or payments one owes with those one is entitled to receive
35. What is meant by the term "Amortization"?
Answers:
• Taking out a loan
• The reduction of debt by regular principal payments
• Payment of interest on a loan
• Buying negotiable instruments
36. What is the current maximum limit that the FDIC will insure any one person at a bank for?
Answers:
• $50,000
• $100,000
• $250,000
• $1,000,000
37. Checking all bank account papers to make sure that the bank records and your records agree is known as:
Answers:
• Credit check
• Credit rating
• Underwriting
• Reconciliation
38. What is meant by the term "Thrift"?
Answers:
• A clearinghouse for checks
• An organization formed for the purpose of holding deposits for individuals
• A method of systematically saving money
• Writing checks for an amount and cashing them for a different amount
39. What is one criticism of offshore banking?
Answers:
• No interest is earned on the account
• Difficult to set up
• It is often associated with organized crime
• It helps the economy in foreign nations
40. What is a "bill of exchange"?
Answers:
• The same as a promissory note
• A written order by the Drawer to the Drawee to pay money to the Payee
• A loan agreement for property
• A verbal payment agreement
41. How have banks changed in recent years to respond to customer needs and wants?
Answers:
• They have started offering fewer services
• They have started interacting more with customers by requiring people to come into the bank
• Banks have started providing investment and insurance services also to offer customers one stop shopping
• They have started charging higher interest rates
42. What is a "promissory note"?
Answers:
• The same as a check
• The same as a draft
• A written promise by the maker to pay money to the payee.
• A loan agreement for property
43. Why do banks charge higher interest rates from customers with poorer credit?
Answers:
• As a moral penalty
• To create a disparity between the rich and the poor
• Due to risk based pricing policy i.e. charging a higher rate from customers more likely to default
• To dissuade poor credit customers from banking
44. Why do offshore banks not save someone from paying taxes on the money in the account?
Answers:
• The offshore bank will contact the U.S. government and inform them of what the customers are doing
• The U.S. tax law requires all citizens to pay taxes on both domestic and foreign earnings
• The offshore bank will collect taxes on behalf of the U.S. government
• None of the above
45. What is the definition of a negotiable instrument?
Answers:
• The payee can negotiate what amount is actually deposited into their accounts; it does not have to be the amount stated
• A special type of contract for the payment of money capable of transfer by negotiation
• A contract for land
• A music instrument purchased through a draft
46. What amount would a customer be covered for by the FDIC if he/she had $250,000 in savings at Bank XYZ, and also $50,000 in a retirement account with the same bank?
Answers:
• $0
• $300,000
• $250,000
• $50,000
47. What amount would a customer be insured for if they made deposits to their accounts at three different locations of their bank?
Answers:
• $250,000
• $750,000
• $0
• $50,000
48. What is an example of 'restrictive endorsement'?
Answers:
• Signing a check
• Not signing a check
• Handing someone a check in their name
• Writing "for deposit only" on the back of a check
49. What is meant by the term "Clearing House"?
Answers:
• The wire system used worldwide to clear wire transfers
• A central collection point where banks within a specified geographical area exchange checks with one another
• A place where the interest rate is determined
• None of the above
50. When was the FDIC established?
Answers:
• 1801
• 1933
• 2008
• 1997
51. What is the purpose of the FDIC?
Answers:
• It provides deposit insurance guaranteeing the safety of retail banking customers' money
• It acts as a clearing house for all checks
• It provides loans to banks
• It provides loans to consumers
52. What would happen if Mr. X made a check out to Mr. Y for $100, who indorsed the check, and then sold it for $50 to Mr. Z? Would Mr. Z be able to cash the check?
Answers:
• Yes, but only for $50, not the face value of $100
• Yes, for the amount of $100
• No, Mr. Z can not cash it since it was sold to him for less than the face value
• No, since it was not issued to him
53. Which of the following is a reason for a person to open an offshore account?
Answers:
• They are pressured into it by their family
• They are required to by law
• They want the ability to move their money out of their home country banking system, especially during times of economic turbulence
• They think the onshore banking industry is about to collapse
54. What is meant by "online banking"?
Answers:
• Using the internet to log in to and interact with your bank account
• Going to the bank and talking to the teller
• Using the ATM machine
• Mailing checks to the bank for deposit
55. Which of the following is a benefit of an offshore bank account?
Answers:
• Ability to walk into a local branch of the bank
• Low taxation on the transactions related to the offshore account
• Debit cards
• Customer service
56. What does the term "Nostro Account" imply?
Answers:
• It is another term for an Escrow Account
• It is a banking term to describe an account a bank holds with a bank in a foreign country, usually in the currency of that country
• It is an account with a bank from which any part of the balance may be withdrawn on demand
• It is an account with two or more authorized signatories
57. Why do banks offer debit cards and off-site ATM machines?
Answers:
• To encourage people to shop and go into debt
• For the convenience of their customers in order to build brand loyalty
• Because it is required by law
• Because everyone else does it
58. What does FDIC stand for?
Answers:
• Financial Deposit Insurance Company
• Federal Draft Insurance Company
• Financial Draft Insurance Corporation
• Federal Deposit Insurance Corporation
59. What is meant by the term "Discrete Compounding"?
Answers:
• Paying interest on loans made to other banks
• The process of calculating interest and adding it to the existing principal and interest at the end of finite time intervals such as a day, a month or a year
• Compounding interest only on high interest loans
• The difference between the cost of money and the rate received on it
60. Which of the following is a risk with having money in a bank?
Answers:
• The bank might close down
• There is no insurance mechanism in place on banks
• The US dollar might crash
• There is a run on the banks during turbulent economic times, due to which banks may be unable to give customers all of their money on demand
61. What is a typical retail banking service?
Answers:
• Selling merchandise
• Offering consumers checking accounts
• Establishing web interfaces for customers
• Selling real estate
62. What does MMDA stand for?
Answers:
• Massive money draft account
• Money making draft account
• Monopoly market deposit account
• Money market deposit account
63. What is "Demand Deposit" account another name for?
Answers:
• A Treasury Bill
• A Checking Account
• A Certificate of Deposit
• A Mortgage
64. What is a negotiable instrument drawn against deposited funds to pay a specified amount of money to a specific person on demand called?
Answers:
• A mandate
• A checking Account
• A loan request
• A promissory note
65. Why was the FDIC created?
Answers:
• To manage consumer loans
• To provide a clearing house for consumer loans
• To provide a clearing house for consumer checks and drafts
• To give consumers the confidence that their money in the bank would remain safe even if the bank failed.
66. Why do the words Debit and Credit have meanings on a bank statement different from the ones which they have in normal accounting ( i. e. a debit is actually a withdrawal, a credit a deposit)?
Answers:
• The bank statement is created from the bank's perspective, not the customer's
• The bank industry has different rules from those of the GAAP
• It has been a tradition since the 1800s
• None of the above
67. What is a bank branch?
Answers:
• The entire company of a bank including all locations
• An investment tool
• A physical location of a bank, or one of the several locations of larger banks
• The internet site of a bank
68. What is the situation in which many customers try to withdraw their bank deposits simultaneously, but the bank's reserves are not sufficient to cover the withdrawals called?
Answers:
• Run
• Overdraft
• Panic
• Bankruptcy
69. Why was the FDIC limit of insurance raised to $250,000 temporarily in 2008 thru 2009?
Answers:
• The failure of several banks created a need to bolster consumer confidence in the industry
• To help consumers reduce their tax liabilities
• To help stimulate the economy
• To provide loans to consumers for housing
70. What is the primary way a bank earns money?
Answers:
• By selling memberships
• Through ad revenue from their site
• By paying lower interest on deposits and charging higher interest on advances
• By charging fees on accounts
71. What is the primary function of a bank?
Answers:
• To act as a payment agent for its customers, and to borrow and lend money
• To help people buy cars
• To hide money from the IRS
• To allow the rich to get richer
72. What is meant by the term "risk based pricing"?
Answers:
• Charging a higher rate from customers more likely to default
• Pricing the online services of a bank high
• Charging a higher rate from high net worth customers to capitalize on their wealth
• Charging higher bank fees from customers based on their income
73. What does the term "Straight Paper" denote?
Answers:
• It is another name for a bond
• It is another term for cash
• It is a method used for depositing checks
• It stands for unsecured notes, bills of exchange and/or banker's acceptances
74. What is a holder in due course?
Answers:
• The payee of a negotiable instrument
• The drawee of a negotiable instrument
• An innocent party who purchases a negotiable instrument without any defect in the instrument or any notice of dishonor.
• The writer of a check
75. What is the term which describes illegally benefiting from float e. g. by depositing and drawing checks between accounts at two or more banks?
Answers:
• Floating
• Rejecting
• Kiting
• Stocking
76. What type of account would someone put their money into if they wanted to earn a high rate of return and not to have access to their money for a fixed period e.g. 90 days?
Answers:
• A certificate of deposit
• A checking account
• A savings account
• A stock account
77. What is "Negotiable Order of Withdrawal Account" i.e. NOW Account, another name for?
Answers:
• A mortgage loan
• A checking account with no fees
• A checking account that earns interest
• A savings account
78. What can the FDIC do to a member bank if the bank fails to comply with the set standards?
Answers:
• Send a letter to the Congress
• Stop insuring that bank's customers
• Declare the bank insolvent and take over its management
• Close down the bank
79. What type of account would someone who wants to earn a high rate of interest and does not intend to have many transactions open?
Answers:
• A checking account
• A savings Account
• A mortgage loan
• A money market account
80. How does a bank make money by providing currency exchange services to its customers?
Answers:
• By charging the customers a slightly higher exchange rate than the rate it pays
• By cheating the customers on the exchange rate
• By forcing them to deposit the money in their bank
• By asking the customers to introduce five friends to the bank as customers
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