Banking Final
If you have invested $10,000 in a tie deposit at a rate of 3.5% compounded semi annually how much will be in that account at the end of two years?
$10,718.59
suppose you borrow $1,000 and pay the loan back in 12 equal payments of $95.50. What is the finance charge for this loan?
$146
How many District Reserve Banks are there in the structure of the Federal Reserve?
12
Documentation of most credit problems stay in a consumer's file for at least?
7 years
What represents the effect of compounding interest on an investment?
APY
Which of the following is NOT an example of a time deposit? -Money market account -basic checking account -CD -savings account
Basic checking account
What is the most common form of a transaction account?
Checking account
What type of money is backed by something of value (like gold)
Commodity Money
Which of the following attempts to protect the information that credit bureaus may collect? - Fair Debt Collection Act -Fair Credit Reporting Act -Truth in Lending Act -Equal Credit Opportunity Act
Fair Credit Reporting Act
By law, every bank in the United States much be part of the Federal Reserve System T?/F
False
Fed Fund Rates are the rates that the best customer gets from the bank T/F
False
If the Federal Government wants to increase spending in our economy they could influence it by increasing income taxes T/F
False
One of the main functions of the Federal Reserve is to serve as a bank for the general population T/F
False
The Chairman of the Federal Reserve serves no more than 2 terms for a total of 8 years. T/F
False
The Truth in Lending Act prohibits bill collectors from using deceptive or abusive tactics T/F
False
If a bank wants to borrow money from another bank what is the interest rate they get called
Federal Fund Rate
What is the danger of the money supply growing too fast?
Inflation
If the government restricts the flow of cash into the economy too severely
It could put us in a recession
How is money made in our economy?
It is borrowed into existence
If the discount rate moves up what will happen to the prime rate?
It will move up too
Money that can be spent immediately referred to as the "base" is called? -m2 -m3 -m1 -mzm
M1
Money at zero maturity and represents all available liquid money is called
MZM
The money supply and the economy are linked closely to interest rates. So generally when rates are high...
Money is said to be tight, and business will slow down
Which of the following is NOT true about a basic checking account? -Pays interest -simple to use -none of the above -very liquid
Pays interest
Consist of vault cash and the required percentage amounts on deposit of the Fed
Primary reserves
Keynesian economics will do what to help the economy to move
Raise or lower taxes
The last meeting of the Fed they decided not to raise interest rates again, what could be the fear of raising them?
Recession
Requires a bank to maintain adequate reserves for the funds they have on deposits? -regulation D -regulation DD -regulation E -None of the above
Regulation D
What is it called when a check has been dated for more than 6 months?
Stale check
The number one thing everyone needs to understand about investing is the compounding effect of money. Why is it important?
The snowball effect of interest being added back to your principal
A transaction account is also a demand deposit? T/F
True
An increase in money supply and incomes often causes prices to go up as well T/F
True
Fiscal policy is slower to make change in our economy than monetary policy T/F
True
If you want to help slow dow inflation you would want to raise interest rates under monetary policy T/F
True
The Board of Governors serve a 14 year term and can only serve one term T/F
True
Which of the following largely eliminated the wide variation of legal regulation from the country's payments system? -expedited funds availability act of 1987 -national banking act of 1864 -UCC of 1958 -fed reserve act of 1913
UCC of 1958
What is the most liquid item listed here? -a savings account -6 month CD -A house -A checking account
a checking account
a high DSRC indicates that a company has
a good bit of operating income available for debt services
a legal claim a lender has on property to secure a debt is called
a lien
one big difference between a commercial bank and a mutual savings bank is that
a mutual savings bank is owned by depositors, not stockholders
the concept that the borrowers who are most willing to accept a high interest rate are the some borrowers who are most likely to default on their loans is called
adverse selection
Which of the following is NOT true about banks? -banks distribute the medium of exchange -all banks are organized as corporations -banks may be charted either by federal or state governments -banks are essential to maintaining the economy
all banks are organized as corporations
how does the federal reserve influence the flow of deposits? -setting reserve requirements -influence the discount rate -creating or removing money with open market operations -all of the above
all of the above
which of the following actions helps a consumer raise a low score of maintain a high one? -avoid opening several credit card accounts at the same time -keep credit card balances under 25% of the limit -make all loan payments on time -none of these -all of these
all of these
one banks move money between -other banks -banks and individual customers -governments -all the above
all the above
A _______ instrument is payable to whoever holds it
bearer
which of the following endorsements is the least secure? -qualified -restrictive -full -blank
blank
what "general" criteria must a borrower have to obtain an SBA loan?
both 20% down and proof of knowledge
Marsol has written a $500 check to Stephan, but she has only $300 in her account and it is returned unpaid to Stephan. Marsol has written a
bounced check
what type of loan is used to cover short-term until long-term financing is in place?
bridge loan
A legal approval to operate a bank as a business is called
charter
about 60% of the deposit and loan businesses in the US is done by
commercial banks
which of the following types of lending accounts for the largest dollar market?
commercial lending
which of the following type of business loan is often packages with a real estate loan?
construction loan
al of the following are considered installment loans except -auto loans -credit card loans -home equity loans -educational loans
credit card loans
a bank evaluates the ______ of all customers who apply for loans
credit worthiness
When the economy experiences high unemployment and little or no business growth the Federal government may attempt to stimulate business by "priming the pump" What does that mean?
cut taxes
which of the following directly transfers money from a person's account to the account of a retailer?
debit card
debt/income=
debt rate
Which of the following does the federal reserve require reserve requirement for? -both A and B -Time deposits -demand deposits -none of the above
demand deposits
people who put money into the banks are called ______
depositors
a _____ intermediary is a financial institution that obtains funds from the public and uses them to finance it business
depository
The rate of interest the Federal Reserve charges banks for short-term loans is called the
discount rate
the person who signs a draft is the
drawer
What Monetary Policy tool would you use to help get the USA out of recession
drop the discount rate
total assets minus total liabilities equals
equity
a bill of ______ is a negotiable and unconditional written order addressed by one party to another
exchange
a form of asset-based lending that advances cash to a business in exchange for its receivables is called
factoring
Recent history has proven that financial markets can effectively self-regulate. t/f
false
Secured loans are sometimes called signature loans? t/f
false
The most common form of a negotiable instrument is a promissory note t/f
false
a bank is not-for-profit organization t/f
false
a check must be written on paper in order to be legal t/f
false
a full endorsement limits both the transferability and the further negotiability of a check t/f
false
a loan company is not a financial intermediary because it does not receive deposits t/f
false
commercial banks offer their services only to businesses t/f
false
general speaking, banks offer customers few services today than they did 20 years ago t/f
false
if a credit applicant has opened many new accounts recently, that is probably a sign that the applicant is very creditworthy t/f
false
it is illegal for a bank to make different check-cashing rules for customers and non customers t/f
false
it is illegal for banks to charge higher interest rates for loans than they pay depositors t/f
false
return on equity is the ratio of net income to total assets t/f
false
short-term loans are always for small amounts of money? t/f
false
the Federal Reserve clears about 90% of the checks written in the US t/f
false
the amount a borrower pays to use the principal of a loan is called a fee t/f
false
the government lends billions of dollars each year to American businesses through SBA? t/f
false
the maker of the checks is called the drawee t/f
false
the more diversified you portfolio is the more "risk" there is of losing t/f
false
the term moral hazard means that consumers with poor moral character are a high credit risk t/f
false
which of the following is an example of a restrictive endorsement? -the signature of the holder -"Pay to order of Jill Davies, without recourse" -"Pay to the Order of Tevin Washington" -"For deposit only"
for deposit only
a _____ endorsement transfers a check to another specified party
full
which of the following is a merchandising business?
ice-cream shop
which of the following would a business probably NOT finance by a term loan?
increasing inventory
which of the following is a non depository intermediary?
insurance company
the risk that a bank will have to sell its assets at a loss to meet its cash demands is called
liquidity risk
the principal amount of the loan divided by the value of the securing property is?
loan-to-value
a ____ occurs when one or more banks going or acquire another bank or banks
merge
one result of competition among banks is that
more services are available to consumers
which of the following is NOT an element of negotiability? -must state the amount to be paid -must be payable on demand -must contain a signature -must be written
must be payable on demand
Reserve requirements apply to what type of money supply? -s7 -m2 -mzm none of the above
none of the above
most short-term business loans are for
one year or less
a ______ check is a check that is dated later than the date on which is actually written
postdated
which of the following interest rates is given to someone with the best FICO score?
prime rate
What is the regulation that oversees the automatic payments? -regulation dd -regulation e regulation dd -regulation E
regulation E
______ cards have embedded microchips use embedded logic to change and store values and record transactions
smart
the different between what a bank pays in interest and what it receives in interest is called
spread
the term negotiation, as it applies to a negotiable instrument, applies to
the ability of the holder to obtain its value
in the US, banks and ______ work together to form the banking system and to ensure the money supply is adequate, apposite, and trustworthy
the government
which of the following is NOT a source of income for a bank? -the interest earned by depositors -investments -loan income -fees for services
the interest earned by depositors
which of the following statements about open-end loans is true? -an auto loan is probably the most common type of open-end loan -the longer you use the money, the more you pay -the amount owed is fixed -the term is fixed
the longer you use the money, the more you pay
which of the following features of a check indicated who is to receive the funds?
the payee
If the Federal Reserve increased reserve requirements for banks it would
tighten the amount of money out there to lend out
which of the following is an approved use of an SBA loan?
to purchase new equipment
what is the finance charge of a loan?
total interest and fees paid
the 9=digit number printed on a check that identifies the bank that holds the checking number account and is responsible for payment is called the
transit number
Contract financing is secured by the value of a specific contract? t/f
true
NSF or a bounced check means the Drawer doesn't have money to cover the check t/f
true
SBA defined a wholesale businesses as a small business if they have fewer than 100 people? t/f
true
a check cannot be negotiated until it has been endorsed t/f
true
a good generic credit score is 700? t/f
true
a lending policy is a written statement of the guidelines and standards a bank must follow in making credit decisions t/f
true
all federally charted banks much be corporations t/f
true
almost no business can exist without financing debt? t/f
true
check use in the United States is beginning to decline t/f
true
credit cards issued by banks is a form of lending t/f
true
equity is the difference from the value of debt and what you have paid off
true
is your FICO score the number one thing they look at is do you pay your bill on time t/f
true
it is more difficult for lenders to evaluate business loans applications than it is consumer loan applications. t/f
true
merchandisers sell goods or services. t/f
true
record keeping is an important part of securing your money in a bank t/f
true
subprime rates are higher-than-normal interest rates offered to a less-than-perfect credit applicant t/f
true
the higher the rick of an investment the higher the chance you will make a better return on your money t/f
true
the overwhelming majority of businesses in the USA can be classified as small businesses. t/f
true
under some circumstances, it is legal to write a postdated check t/f
true
unlike consumer lending, most commercial lending is regulated only by the terms of the loan agreement and some state laws. t/f
true
a commercial bank that specializes only in business banking is sometimes called a _____ bank
wholesale
