Correct Answer:
The difference between the interest rate a bank charges from a borrower and the interest rate a bank pays to a depositor
Note: This Question is unanswered, help us to find answer for this one
2. How does a bank make money by providing currency exchange services to its customers?
Answer
Correct Answer:
By charging the customers a slightly higher exchange rate than the rate it pays
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3. What type of account would someone who wants to earn a high rate of interest and does not intend to have many transactions open?
Answer
Correct Answer:
A money market account
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4. What can the FDIC do to a member bank if the bank fails to comply with the set standards?
Answer
Correct Answer:
Declare the bank insolvent and take over its management
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5. What is "Negotiable Order of Withdrawal Account" i.e. NOW Account, another name for?
Answer
Correct Answer:
A checking account that earns interest
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6. 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?
Answer
Correct Answer:
A certificate of deposit
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7. What is the term which describes illegally benefiting from float e. g. by depositing and drawing checks between accounts at two or more banks?
Answer
Correct Answer:
Kiting
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8. What is a holder in due course?
Answer
Correct Answer:
An innocent party who purchases a negotiable instrument without any defect in the instrument or any notice of dishonor.
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9. What does the term "Straight Paper" denote?
Answer
Correct Answer:
It stands for unsecured notes, bills of exchange and/or banker's acceptances
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10. What is meant by the term "risk based pricing"?
Answer
Correct Answer:
Charging a higher rate from customers more likely to default
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11. What is the primary function of a bank?
Answer
Correct Answer:
To act as a payment agent for its customers, and to borrow and lend money
Note: This Question is unanswered, help us to find answer for this one
12. What is the primary way a bank earns money?
Answer
Correct Answer:
By paying lower interest on deposits and charging higher interest on advances
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13. Why was the FDIC limit of insurance raised to $250,000 temporarily in 2008 thru 2009?
Answer
Correct Answer:
The failure of several banks created a need to bolster consumer confidence in the industry
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14. 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?
Answer
Correct Answer:
Run
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15. What is a bank branch?
Answer
Correct Answer:
A physical location of a bank, or one of the several locations of larger banks
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16. 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)?
Answer
Correct Answer:
The bank statement is created from the bank's perspective, not the customer's
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17. Why was the FDIC created?
Answer
Correct Answer:
To give consumers the confidence that their money in the bank would remain safe even if the bank failed.
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18. What is a negotiable instrument drawn against deposited funds to pay a specified amount of money to a specific person on demand called?
Answer
Correct Answer:
A mandate
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19. What is "Demand Deposit" account another name for?
Answer
Correct Answer:
A Checking Account
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20. What does MMDA stand for?
Answer
Correct Answer:
Money market deposit account
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Note: This Question is unanswered, help us to find answer for this one
22. Which of the following is a risk with having money in a bank?
Answer
Correct Answer:
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
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23. What is meant by the term "Discrete Compounding"?
Answer
Correct Answer:
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
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24. What does FDIC stand for?
Answer
Correct Answer:
Federal Deposit Insurance Corporation
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25. Why do banks offer debit cards and off-site ATM machines?
Answer
Correct Answer:
For the convenience of their customers in order to build brand loyalty
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26. What does the term "Nostro Account" imply?
Answer
Correct Answer:
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
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27. Which of the following is a benefit of an offshore bank account?
Answer
Correct Answer:
Low taxation on the transactions related to the offshore account
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28. What is meant by "online banking"?
Answer
Correct Answer:
Using the internet to log in to and interact with your bank account
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29. Which of the following is a reason for a person to open an offshore account?
Answer
Correct Answer:
They want the ability to move their money out of their home country banking system, especially during times of economic turbulence
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30. 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?
Answer
Correct Answer:
Yes, for the amount of $100
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31. What is the purpose of the FDIC?
Answer
Correct Answer:
It provides deposit insurance guaranteeing the safety of retail banking customers' money
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32. When was the FDIC established?
Answer
Correct Answer:
1933
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33. What is meant by the term "Clearing House"?
Answer
Correct Answer:
A central collection point where banks within a specified geographical area exchange checks with one another
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34. What is an example of 'restrictive endorsement'?
Answer
Correct Answer:
Writing "for deposit only" on the back of a check
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35. What amount would a customer be insured for if they made deposits to their accounts at three different locations of their bank?
Answer
Correct Answer:
$250,000
Note: This Question is unanswered, help us to find answer for this one
36. 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?
Answer
Correct Answer:
$300,000
Note: This Question is unanswered, help us to find answer for this one
37. What is the definition of a negotiable instrument?
Answer
Correct Answer:
A special type of contract for the payment of money capable of transfer by negotiation
Note: This Question is unanswered, help us to find answer for this one
38. Why do offshore banks not save someone from paying taxes on the money in the account?
Answer
Correct Answer:
The U.S. tax law requires all citizens to pay taxes on both domestic and foreign earnings
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39. Why do banks charge higher interest rates from customers with poorer credit?
Answer
Correct Answer:
Due to risk based pricing policy i.e. charging a higher rate from customers more likely to default
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40. What is a "promissory note"?
Answer
Correct Answer:
A written promise by the maker to pay money to the payee.
Note: This Question is unanswered, help us to find answer for this one
41. How have banks changed in recent years to respond to customer needs and wants?
Answer
Correct Answer:
Banks have started providing investment and insurance services also to offer customers one stop shopping
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42. What is a "bill of exchange"?
Answer
Correct Answer:
A written order by the Drawer to the Drawee to pay money to the Payee
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43. What is one criticism of offshore banking?
Answer
Correct Answer:
It is often associated with organized crime
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44. What is meant by the term "Thrift"?
Answer
Correct Answer:
An organization formed for the purpose of holding deposits for individuals
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45. Checking all bank account papers to make sure that the bank records and your records agree is known as:
Answer
Correct Answer:
Reconciliation
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46. What is the current maximum limit that the FDIC will insure any one person at a bank for?
Answer
Correct Answer:
$250,000
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47. What is meant by the term "Amortization"?
Answer
Correct Answer:
The reduction of debt by regular principal payments
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48. What does the term "Netting" mean?
Answer
Correct Answer:
The offsetting with a counterparty or counterparties of financial obligations or payments one owes with those one is entitled to receive
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49. What is a secondary way through which banks earn money?
Answer
Correct Answer:
By charging fees on accounts
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50. Why can't anyone start a new bank?
Answer
Correct Answer:
It is a regulated industry and a license is required before opening a new bank
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51. What was the purpose of the 2006 Deposit Insurance Fund?
Answer
Correct Answer:
To merge the two earlier funds namely the Bank Insurance Fund and the Savings Associations Insurance Fund
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52. What is the definition of an offshore bank?
Answer
Correct Answer:
A bank located outside the country of the depositor, usually in a lower tax jurisdiction
Note: This Question is unanswered, help us to find answer for this one
53. What level will the FDIC insure any one person at a bank for beginning January 1, 2010?
Answer
Correct Answer:
$100,000
Note: This Question is unanswered, help us to find answer for this one
54. Which of the following would not be covered by the FDIC?
Answer
Correct Answer:
U.S. Government investments such as treasury bills
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55. What method would a consumer most likely use to move funds between their offshore account and their domestic account?
Answer
Correct Answer:
Wire transfer
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56. What amount would someone who has $500,000 in one bank and $250,000 in another bank be insured for in total?
Answer
Correct Answer:
$500,000: $250,000 from each bank
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57. What type of account would someone who wants the facility to pay people through checks open?
Answer
Correct Answer:
A checking account
Note: This Question is unanswered, help us to find answer for this one
58. 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?
Answer
Correct Answer:
Indemnity
Note: This Question is unanswered, help us to find answer for this one
59. What does the term "Ex Gratia Payment" mean?
Answer
Correct Answer:
Any payment made to an insured party for which an insurance company had no formal liability
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60. Which of the following is not covered by the FDIC?
Answer
Correct Answer:
Money market funds
Note: This Question is unanswered, help us to find answer for this one
61. How is a money market account different from a savings account?
Answer
Correct Answer:
A money market account earns a higher interest rate and typically has a limit on the number of transactions each month
Note: This Question is unanswered, help us to find answer for this one
62. What are the four requirements for a promissory note to be legal?
Answer
Correct Answer:
An unconditional order, a specific amount, being payable to a specific person, being payable on a specific date
Note: This Question is unanswered, help us to find answer for this one
63. What is meant by "restrictive endorsement"?
Answer
Correct Answer:
Indorsing a check with terminology limiting how the funds can be applied
Note: This Question is unanswered, help us to find answer for this one
64. What is the government entity that insures bank balances?
Answer
Correct Answer:
FDIC
Note: This Question is unanswered, help us to find answer for this one
65. Why are offshore banks often able to offer a client higher interest rates?
Answer
Correct Answer:
Lower cost structure allows them to pay higher interest rates
Note: This Question is unanswered, help us to find answer for this one
66. What is another name for a bill of exchange?
Answer
Correct Answer:
A check
Note: This Question is unanswered, help us to find answer for this one
67. What is meant by the term Retail Banking?
Answer
Correct Answer:
Banking institutions executing transactions with consumers
Note: This Question is unanswered, help us to find answer for this one
68. Which of the following is a feature often found in an offshore bank account, not usually found in an onshore bank account?
Answer
Correct Answer:
Unnamed accounts
Note: This Question is unanswered, help us to find answer for this one
69. Which of the following is a requirement that a bank has to comply with?
Answer
Correct Answer:
Minimum capital
Note: This Question is unanswered, help us to find answer for this one
70. How do banks offer services to all levels and types of individuals and still earn money?
Answer
Correct Answer:
By having a variety of account types and fee structures offering something to everyone
Note: This Question is unanswered, help us to find answer for this one
71. What does the term "Debenture" imply?
Answer
Correct Answer:
A long term loan to a company, usually at a fixed rate of interest and for a specific term
Note: This Question is unanswered, help us to find answer for this one
72. Why is a negotiable instrument a "special contract"?
Answer
Correct Answer:
Because it does not include the typical requirements of a contract such as offer, acceptance and consideration
Note: This Question is unanswered, help us to find answer for this one
73. What is the process which the Federal Reserve uses to influence the availability and cost of money and credit called?
Answer
Correct Answer:
Monetary policy
Note: This Question is unanswered, help us to find answer for this one
74. What is the signing of a check on its back by the payee referred to as?
Answer
Correct Answer:
Indorsing the check
Note: This Question is unanswered, help us to find answer for this one
75. How is a savings account different from a certificate of deposit?
Answer
Correct Answer:
Savings accounts can be added to or withdrawn from at any time, CDs can not be
Note: This Question is unanswered, help us to find answer for this one
76. What is meant by the term "Redemption"?
Answer
Correct Answer:
Paying off a mortgage loan in full
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77. What is the ratio of bank reserves to bank deposits called?
Answer
Correct Answer:
Deposit multiplier
Note: This Question is unanswered, help us to find answer for this one
78. What does the term "Availability Float" imply?
Answer
Correct Answer:
The time period or the amount represented by checks that have been deposited but not cleared
Note: This Question is unanswered, help us to find answer for this one
79. What would a person do if they wanted to have the facility to save money as well as issue checks?
Answer
Correct Answer:
Open both a savings and a checking account with the same bank
Note: This Question is unanswered, help us to find answer for this one
80. Would a bank be allowed to pay someone from a personal account without a mandate from the customer?
Answer
Correct Answer:
No, not without a check drawn against the account by the account holder
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81. Which of the following is a characteristic of a certificate of deposit?
Answer
Correct Answer:
It requires that the funds be kept in the account for a minimum fixed period of time e.g. 90 days
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Retail Banking Industry And Processes MCQs | Topic-wise
