#1
What does APR stand for in banking?
Annual Percentage Rate
ExplanationThe annualized interest rate charged to borrowers.
#2
What is the main function of a checking account?
To facilitate everyday transactions and payments
ExplanationProvides a convenient way to manage day-to-day finances.
#3
What is the primary purpose of a savings account?
To earn interest on deposited money while keeping it accessible
ExplanationSecure way to save money while earning interest.
#4
What does the term 'overdraft' mean in banking?
An account balance that goes below zero due to exceeding available funds
ExplanationAllows an account holder to withdraw more money than available.
#5
What is the purpose of a wire transfer?
To transfer money electronically between two bank accounts
ExplanationFast and secure way to send funds electronically.
#6
What is the purpose of a 401(k) retirement account?
To invest pre-tax income for retirement
ExplanationTax-advantaged retirement account offered by employers.
#7
Which of the following is NOT a type of credit card?
Debit card
ExplanationA debit card is linked directly to a checking account, not a line of credit.
#8
What does the term 'liquidity' refer to in banking and finance?
The ease with which an asset can be converted into cash without affecting its market price
ExplanationMeasure of how quickly an asset can be turned into spendable cash.
#9
What does the term 'amortization' refer to in finance?
The process of paying off debt over a period of time through regular payments
ExplanationGradual repayment of a loan through scheduled installments.
#10
What is the role of a financial intermediary in the banking system?
To match savers with borrowers and channel funds between them
ExplanationFacilitates the transfer of funds between lenders and borrowers.
#11
What is a collateralized loan?
A loan secured by an asset, such as real estate or a vehicle
ExplanationRequires assets as security against default.
#12
What does the term 'foreclosure' mean in the context of mortgages?
The process of a lender taking possession of a property due to non-payment of the mortgage
ExplanationLegal process by which a lender repossesses a property due to missed payments.
#13
What is the function of the Federal Reserve in the United States?
Regulating monetary policy and supervising banks
ExplanationCentral bank responsible for managing the country's money supply and interest rates.
#14
What is the difference between a credit union and a bank?
Credit unions are not-for-profit organizations, while banks are for-profit institutions
ExplanationCredit unions are member-owned cooperatives, while banks are owned by shareholders.
#15
What does the term 'compound interest' mean?
Interest calculated on the sum of the initial principal and any accumulated interest
ExplanationInterest earned not only on the initial investment but also on the interest already earned.
#16
What does the term 'fractional reserve banking' refer to?
A banking system where banks must hold a fraction of their deposits as reserves
ExplanationSystem where banks keep only a portion of deposits on hand and lend out the rest.
#17
What does the term 'derivative' mean in finance?
A financial contract whose value is derived from the performance of an underlying asset
ExplanationFinancial instrument whose value is based on the value of another asset.
#18
What is the role of an underwriter in securities issuance?
To guarantee the sale of securities to investors
ExplanationAssumes the risk of buying securities from the issuer and reselling them to investors.