Banking Careers part 3

Tenisha and Alex have three joint accounts at ACME bank. The total value of all the accounts is $745,000. How much money does each of them have that is not insured by the FDIC?

$122,500

Jenna is in the process of applying for a car loan. The price of the car is $22,500. The sales tax is $1,940. The title and registration is $ 313. Jenna has a down payment of $1,500 and she is trading in her old car, which the lender values at $2,000. How much financing will Jenna need?

$21253

Jessica has several accounts at ACME bank. She has $55,000 in a student saver account, $25,000 in a checking account, $10,000 in Pfizer stock, and $6,000 in bonds. If ACME bank were to fail, what amount is Jessica insured for under the FDIC?

$80,000

1 binding 2 escrow 3 market niche

1 a legal term, often referring to contracts, which obligate the signing parties to the terms in the contract 2 funds held by a third party in promise to another party by contract; mortgage loans may call for several payments of the mortgage to be held "in escrow" as an assurance, and the lending institution can access these funds if the borrower misses payments; real estate taxes and home insurance are sometimes held in escrow depending on the borrower's arrangement with the lender 3 a specific segment of a market; where lenders specialize in serving specific segments of borrowers, such as first-time homeowners Vocab Arcade

credit score Fair Isaac Corporation FICO score

1 a numerical rating of the creditworthiness of an individual, based on payment history, debts and liabilities, length of credit history, types of credit, and new credit recently applied for; can range from 300 to 900 points 2 stands for Fair Isaac Corporation, the company that originated credit scores 3 a calculated number between 300 - 900 that represents the amount of risk a borrower may have in a lending transaction; calculation is based on an individual's or business' number of credit accounts opened, amount of total loans, repayment history, number of inquiries in a given period, and other variables that determine creditworthiness

1 double entry system 2 endorse 3 line of credit 4 payee 5 payer

1 an accounting practice that tracks both credits and debits 2 signing the back of a check before you can deposit it into your account 3 an amount of money extended by a bank of financial institution and ready for the borrower to use at any time provided the latter adheres to certain rules and regulations 4 the individual who receives the funds on a check; the person who the check is written to 5 the person or business writing the check; the owner of the checking account on which the check is being written

annual percentage rate credit loan mortgage

1 interest rate charged over the term of a year, including the monthly interest rate and taking into consideration the compound interest; APR 2 the amount of funds that a financial institution is willing to extend to a specific customer or borrower in the form of a loan; can be open-ended (no final payment date) or close-ended (specific payoff date) 3 funds given from one party to another, under an agreement detailing repayment schedule, interest due, and default terms; may included a collateral as a security 4 a secured loan used to buy a home

1 using a device such as a smartphone or tablet to access a bank account through the Internet 2 using the Internet for access to banking services, including account management, money movement, deposits and withdrawals, and bill payment 3 financial institutions whose charters were drawn up and approved to designate that they will not have nor need any physical customer-accessible headquarters and branches; financial institutions that offer only online banking through a website interface and mobile applications

1 mobile banking 2 online banking 3 online only banks

If interest rates are expected to increase, which type of loan would be most beneficial to a borrower?

10 year fixed rate mortgage loan

Tuan and Jackie just had a baby and are trying to plan for her future. What type of account would be best for them to open?

529 Plan

What is the main difference between a checking account and a savings account?

A checking account is used to pay creditors, while a savings account is used to keep money for the long term.

Which of the following statements regarding debit and credit card liability is correct?

A debit card carries more risk of loss to the cardholder.

What is one main obstacle of online-only banks?

Check deposits take longer

What is an advantage of a closed-ended agreement?

Closed-ended agreement interest rates are usually lower than open-ended agreement rates.

Two people are buying the exact same car with a listing price of $25,000 and the same rate of 2.25%. Customer A has a $2,500 down payment but Customer B does not have a down payment. Who pays less for the car?

Consumer A, because the down payment reduces the amount financed

Joe and Fred are buying the same model of car. The sticker price for the car is $25,000. The interest rate is the same for both consumers. Consumer A decided to take out a 48-month loan and Consumer B decided to take out a 60-month loan. Which person will pay less for the car?

Consumer A, because the loan term is shorter

Two consumers are buying the same model car. The sticker price for the car is $21,000. The interest rate is the same for both consumers. Consumer A decided to take out a 36-month loan and Consumer B decided to take out a 48-month loan. Which person will pay more for the car?

Consumer B, because the loan term is longer.

What was a key factor that led to the success of using checks as a national system of exchange?

Created a system of clearinghouses as part of the FRA

Why are credit cards safer than debit cards for a consumer?

Credit cards offer more fraud protection than debit cards

What is the difference between a modern day check and one used in the early days of check writing?

Early-day checks took up to three months to process, while a modern-day check can be processed in on day.

Who is responsible for calculating credit scores and reporting them to lenders and banks?

Experian, Equifaz, and TransUnion

Who developed the current scoring system for using credit scores reports to compute credit scores?

FICO

When shopping for loans, which of the following tasks are critical to getting the best rate for your loan?

Find a lender that specializes in a market niche that suits your needs.

What is the difference between a fixed-rate mortgage and a variable-rate mortgage?

Fixed-rate loans have the same rate for the entire length of the loan.

What type of an IRA would a woman approaching her 74th birthday but still earning a comfortable income through the sale of her popular mystery novels?

IRA based on investment returns exclusively

What is the correlation between interest rates on savings options, amount of funds in an account, and account liquidity?

More funds in the account and less liquidity result in higher interest rates.

What is one benefit that is available to accountholders through online banking that is not as readily available through traditional banking processes?

Not prompt updates on account balances

What is the main benefit of using an online auction site?

Online auction sites allow the borrower to comparison shop quickly.

In order to open a savings account, what information is required? (Select all that apply.)

SSN, address, funds to deposit

Javier has several accounts with Bank First. He has a savings account, a checking account, a stock account, and owns municipal bonds. Which of these are covered by FDIC insurance?

Savings and checking accounts are covered, but not the stocks or bonds.

Due to innovations in technology, what has happened to the physical check retention guidelines for the banking industry?

The guidelines have decreased the amount of time to keep checks.

What is the difference between a traditional IRA and a Roth IRA?

Traditional IRAs lower your taxable income upon contribution, while a Roth IRA does not.

Brenda and Ethan just got married on a Saturday night. They are leaving for their honeymoon at 6:00 am Sunday morning. They received a lot of wedding gifts that included a bunch of checks. Which of the following is the best option for them to deposit the checks?

Use their smartphone to deposit the checks

What is the difference between a commercial loan and a residential loan?

a commercial loan is used to support the growth of an organization

Hal has a credit card balance of $20,000 with a 15.9% interest rate. What would be the best option for Hal to reduce his expenses?

apply for a personal loan

How is a check treated by the US government?

as a negotiable instrument

What is the best way an account holder at an online-only bank can avoid excess fees?

ask for cash back when making a debit card purchase at a store

In order for a bank to make a profit, it must do which of the following?

assses higher interest rates on loans than paid to depositor's on savings accounts

What is one downside of banking at a traditional branch versus online-only banking?

bank holiday

What items are found in the MICR line on a check? (Select all that apply.)

bank routing number, check number

What are the similarities between a traditional IRA and a Coverdell ESA?

both are investments that allow money to be contributed pre-tax

Jermaine is going on vacation, and after purchasing the airline tickets, hotel, and some prepaid excursions, he realizes that he has almost maxed out his credit card and will not have enough money while on vacation. Jermaine has a great credit score. What is his best option so he has enough money to pay for expenses while on vacation?

call his credit card company for a credit extension

Interest rates are the highest they have been in two years and are expected to decrease in the upcoming months. Which of the following is the best option when opening up a new bank account?

certificate of deposit

Which of the following would normally result in a higher interest rate at a bank?

certificate of deposit with $25,000

How does a lender qualify a lead?

collect personal and financial information

Which of the following people are most likely to have a credit score?

college student with a student loan

Which of the following would most significantly decrease one's credit score?

consistent late payments for a credit card line

You receive a check for $100 but you owe your friend $100. What is the easiest way for you to pay your friend?

countersign the check

What would be the best way to make the use of Internet banking across countries more seamless?

create a universal internet currency

Which is a riskier loan for the lender?

credit card loan with an outstanding balance of $25,000

John writes a check to Abigail for $250. How would this be reflected in a double entry accounting system?

debit to John's account and credit to Abigail's account

What is the effect of a trade-in (for a paid-off vehicle) on a borrower's loan payments, given all other factors being equal?

decrease

Accounts that contain funds that can be retrieved upon request by the depositor are called _____.

demand deposit account

All banks follow the same guideline for determining if an applicant qualifies for a loan.

false

Phone banking includes the use of laptops, iPads, tablets, or smartphones.

false

State laws are the main governing agency over loans.

false

States rely on banks to manage their 529 plans?

false

The FDIC insures savings accounts, checking accounts, stocks, and U.S Treasury bonds.

false

The smaller the monthly payment, the higher the cost of the loan.

false

Jim is visiting Manhattan and needs to transfer money from his savings account to his checking account. Which would be the best option for Jim to make this exchange?

find a local branch and make the transfer at the teller window use an ATM at a local convenience store to make the transfer

What is one way a borrower can qualify for a lower rate on a home mortgage?

have tax monies put in escrow

What is one main benefit of online-only banks?

higher interest rates

What is the relationship between credit score and interest rate?

higher the credit score, lower the interest rate

1 more commonly known as individual retirement accounts, which enable people to save money for their retirement with a variety of tax benefits and restrictions; (IRAs) 2 funds stored for later use; deferred consumption

individual retirement arrangements savings

Which of the following would be the most helpful resource in obtaining credit for a new car loan?

information obtained about a car loan

What is the largest source of income for a bank?

interest on loans

What is an advantage of an open-ended credit agreement?

it allows borrowers to have more control over how much and when they borrow

Josie is an entrepreneur and just launched her first business selling a girls clothing line. Her business is a sole proprietorship. Which of the following accounts is Josie NOT eligible to open?

joint account

A certificate of deposit usually has _____.

limited liquidity

A bank pays an interest rate on deposits of 2.3% and charges an interest rate of 5.0% on personal loans. Customer A has $100,000 deposited in the bank and Customer B has a $100,000 loan with the bank. Given there were no withdrawals or early payments made by either customer, what would the bank's profit be at the end of one year?

not $2700

Given the chart below and the same loan amount, which loan would have the highest cost over the life of the loan, and which loan would have the highest monthly payment?

not 36-month or 84 month

What is the similarity between FNMA and Freddie Mac?

not Both FNMA and Freddie Mac make low interest loans to individuals.

Jason currently has six credit cards, each with a $10,000 limit. Three of the cards have balances on them, while the remaining three have zero balances. Jason is debating on whether he should close the three zero-balance accounts. Which option would have the least impact on Jason's credit score?

not Close the three zero balance accounts to streamline his finances.

While Christmas shopping, Tamara opens up several credit cards accounts at some of her favorite stores to get discounts and save money. What, if any, impact will this have on her credit score?

not It will only decrease her score if she doesn't pay the bills on time.

What is the primary difference between online banking and mobile banking?

not Online banking is more secure than mobile banking.

What is the effect of an upside-down trade-in on a borrower's loan payments, given all other factors being equal?

not The trade-in will not be counted toward the loan.

Which is a more secure form of payment, a cashier's check or a certified check?

not a certified check, because it ensure there are sufficient funds in the account

Which of the following is NOT considered a commercial loan?

not a loan made to an offshore fisherman to buy a new vessel

Which of the following CANNOT be considered when evaluating a credit score?

not applicant's existing debt

Which of the following pieces of information is required by a lender in order to access your credit report?

not borrower's assets and liabilities

Carlos Reyes is looking to apply for a mortgage. Upon applying for the mortgage, Carlos finds that his credit score is really low. This shocks him, as he has had a long credit history and always pays his credit cards and other loans on time. What could be a reason for this low credit rating?

not the mix of loans that Carlos held is too diverse

Which of the following on-line banking features produces the biggest time savings for account holders when compared to traditional banking process?

online monthly bill pay

What distinguishes open-ended credit from closed-ended credit?

open-ended credit can be used repeatedly

What is an open-ended credit agreement better than a closed-ended agreement?

open-ended credit can lead to interest savings for borrowers

What differentiates a domestic banker from an international banker?

opening up branches in other countries

Which of the following had the greatest impact on increased use of checks in the United States?

passing of the NBA

Which of the following steps can a consumer take to increase their credit score? (Select all that apply.)

pay the mortgage on time every month, Use a credit card but keep the balance under 25% of the credit limit.

What is the most important factor in calculating a credit score?

payment history

Which of the following does a credit score usually indicate?

risk of not paying back a loan

What is the primary obstacle that banks face when rolling out mobile banking services to its customers?

security of technology

Which agency is responsible for protecting consumers' rights when it comes to lending practices in the banking industry?

the CFPB

If a consumer has an unresolved complaint about a credit report or their credit score, which agency is responsible for helping to resolve the problem?

the Consumer Financial Protection Bureau

What is the primary difference between a savings account and a certificate of deposit?

the length of time the money is required to be held in the account

What was the primary reason the Banking Act of 1933 disallowed financial institutions from paying interest on demand deposit accounts?

to encourage bankholders to deposit their funds in long-term savings accounts

What is the main reason the amount on a check is written twice?

to prevent fraud

A lender usually requires a certain amount of insurance coverage for a car loan.

true

An advantage of online banking is that an account holder can bank at any hour, any day, from anywhere in the world.

true

Car loan rates are lower for those borrowers with a higher credit rating.

true

Individual retirement arrangements enable people to save money for their retirement with a variety of tax benefits and restrictions.

true

What is the fastest way to compare car loan rates?

use an internet auction site