Principles of Banking Quiz

Your company imports fabric from Egypt. Each bolt of fabric costs 80 Egyptian pounds. The current exchange rate is: 1 U.S. dollar = 5 Egyptian pounds. How much does each bolt of fabric cost in U.S. dollars?

$16

What is the return on equity (ROE) for a bank with total equity of $120,000,000 and a net profit of $12,000,000?

10 percent

What federal law protects customers from unsolicited and unwanted e-mail promotions?

CAN-SPAM Act

Which of the following is a domestic office of a U.S. bank established for the purpose of transacting international business?

Edge corporation

Which of the following Federal Reserve regulations prohibits lenders from discriminating against credit applicants on the basis of age, race, color, religion, national origin, sex, marital status, or receipt of income from public assistance programs?

Equal Credit Opportunity Act (Regulation B)

What federal agency maintains a list of individuals, organizations, and countries subject to economic sanctions?

OFAC

Which law was passed to protect the financial records of individuals from unwarranted access by the federal government?

Right to financial privacy Act

a statement of condition is also known as..

a balance sheet

What highly secure form or system of customer authentication are banks starting to use more frequently to authorize banking transactions?

a biometric system

advertising is deceptive if it is likely to mislead...

a reasonable customer

What business account service provides analytical reports to allow company managers to monitor business operations and determine possible new approaches?

account reconciliation

Which of the following is the responsibility of a bank board of directors?

approving lending authority for bank loan officers

What department helps prevent loan losses by taking action when payments are late?

asset recovery department

Which of the following is a security feature that closes an online banking visit after a certain period of inactivity, such as 5 or 10 minutes?

automatic session expiration

What bank function is primarily responsible for establishing and overseeing risk management processes and safety and soundness policies and procedures?

board of directors

Which of the following is the most liquid?

cash

What should customers request at least annually to check for any unusual activity that may be criminal?

credit reports

What is the possibility that a borrower will not repay the principal and interest of a loan when due?

credit risk

Communicating in clear, concise language, written or spoken, that is articulated from the customer's—not the bank—point of view helps the bank meet which customer expectation?

customer perspective

What is the ability to quickly convert an asset to cash?

diversification

Which of the following loans is normally unsecured?

educational loan

During a bank robbery, what is an employee's primary objective?

ensure the safety of the banks customers and employees

For an individual, what do assets, liabilities, and other legal obligations compose?

estate

What form of planning should adults think about so that their assets and legal obligations are managed well and passed on to their selected beneficiaries?

estate planning

Which of the following is considered a low-risk investment?

government bonds

At what stage in the lending process do banks obtain and evaluate all available information to determine creditworthiness?

investigation

What type of insurance protects a business from financial loss when an employee critical to company operations dies or suffers a serious disability?

key persons insurance

Which of the following is usually the most significant source of bank income?

lending function

What instrument issued by a bank substitutes the credit standing of the bank for the credit standing of the importer (buyer) of goods?

letter of credit

What is the ability of a bank or business to meet its current obligations called?

liquidity

Besides capital adequacy, asset quality, earnings, and liquidity, what other areas are reviewed in the CAMELS rating system?

management and sensitivity to market risk

What strategy holds that a business's objectives are best reached by first identifying customer needs and fulfilling them through an efficient, organization-wide, and management-supported effort?

market-driven strategy

Which of the following involves moving large amounts of illegally obtained cash through bank accounts to hide the source of the money?

money laundering

Which of the following is considered a conservative growth investment?

money market account

What is a useful tool to assess one's complete financial situation?

net worth worksheet

Which of the following measures fee earnings?

noninterest income to assets

Which of the following allows customers to elect not to have their "nonpublic personal information" shared with third parties for marketing purposes?

opt-out privilege

What is the process of gathering information about customers and competitors?

profiling

Which of the following involves replacing one or two ends or corners of a smaller denomination bill with the ends or corners of a larger bill?

raised currency

Discriminating against prospective borrowers because of where they live is known as:

redlining

What function is a bank trust department performing when it keeps records of purchases, sales, cancellations, and reissues of bonds or stock?

registrar

Fair lending laws prohibit banks from prescreening credit applicants on the basis of:

sex

The USA PATRIOT Act allowed banks to:

share employment information of suspected criminal activity

What financial report is a detailed list of assets, liabilities, and capital accounts, showing the financial status of the bank as of a given date?

statement of condition

Which of the following are not typically found in a bank investment portfolio?

stock options

What is an example of a capital market service provided to corporate customers?

structuring and distributing debt securities

What marketing principle holds that, even when employees are not serving the customer directly, they are serving someone in the bank who is serving the customer?

total company effort

The red flags of the Red Flag Rules pertain to:

warning signs of identity theft

What life insurance plan has a savings element?

whole life insurance