Retail Banking Industry and Processes MCQs

Retail Banking Industry and Processes MCQs

The following Retail Banking Industry and Processes MCQs have been compiled by our experts through research, in order to test your knowledge of the subject of Retail Banking Industry and Processes. We encourage you to answer these 80+ multiple-choice questions to assess your proficiency.
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1: Which of the following is a characteristic of a certificate of deposit?

A.   You have to earn at least $100,000 in salary to be allowed to buy a CD

B.   It is just a different name for a savings account

C.   It requires that the funds be kept in the account for a minimum fixed period of time e.g. 90 days

D.   Only large banks offer them

2: Would a bank be allowed to pay someone from a personal account without a mandate from the customer?

A.   No, not without a check drawn against the account by the account holder

B.   Yes, but only to government entities

C.   Yes, if someone presents a written note in good faith to pay them

D.   Yes, because banking is fairly unregulated

3: What would a person do if they wanted to have the facility to save money as well as issue checks?

A.   They can only have one or the other facility

B.   Open both a savings and a checking account with the same bank

C.   Open a savings account with one bank, and a checking account with another

D.   Not use a bank at all

4: What does the term "Availability Float" imply?

A.   The banking hours of your local bank

B.   The period of time it takes a check to be cleared

C.   A limit on how long a check is good for before it becomes invalid

D.   The time period or the amount represented by checks that have been deposited but not cleared

5: What is the ratio of bank reserves to bank deposits called?

A.   Deposit multiplier

B.   Deposit schedule

C.   Reserve ratio

D.   Reserve/Deposit ratio

6: What is meant by the term "Redemption"?

A.   Cashing in a bond coupon

B.   Receiving interest on a loan

C.   Opening a secondary bank account

D.   Paying off a mortgage loan in full

7: How is a savings account different from a certificate of deposit?

A.   Savings accounts are only at banks, cd's are only at credit unions

B.   Savings accounts can be added to or withdrawn from at any time, CDs can not be

C.   Savings accounts are for anyone, cd's are only for rich people

D.   Savings accounts are required by anyone having a checking account, CDs are not

8: What is the signing of a check on its back by the payee referred to as?

A.   Writing the check

B.   Indorsing the check

C.   Cashing the check

D.   Monopolizing the check

9: What is the process which the Federal Reserve uses to influence the availability and cost of money and credit called?

A.   Credit policy

B.   Monetary policy

C.   Credit rating

D.   Federal reserve system

10: Why is a negotiable instrument a "special contract"?

A.   Because nobody has to sign it

B.   Because it is always only for services, not goods

C.   Because there is no date written on it

D.   Because it does not include the typical requirements of a contract such as offer, acceptance and consideration

11: What does the term "Debenture" imply?

A.   A long term loan at prime market rate

B.   A loan for the purchase of securities

C.   A short term loan at an adjustable rate

D.   A long term loan to a company, usually at a fixed rate of interest and for a specific term

12: How do banks offer services to all levels and types of individuals and still earn money?

A.   By sending potentially risky customers to other banks

B.   By finding ways to exploit the rich customers to subsidize the poor ones

C.   By having a variety of account types and fee structures offering something to everyone

D.   By being exclusive and catering only to high net worth individuals

13: Which of the following is a requirement that a bank has to comply with?

A.   Minimum number of customers

B.   Minimum number of employees

C.   Minimum salaries

D.   Minimum capital

14: Which of the following is a feature often found in an offshore bank account, not usually found in an onshore bank account?

A.   Debit cards

B.   Facility to write checks

C.   Unnamed accounts

D.   Wire transfer ability

15: What is meant by the term Retail Banking?

A.   Banking institutions executing transactions with companies

B.   Banking institutions executing transactions with foreign countries

C.   Banking institutions executing transactions with consumers

D.   Banking institutions executing transactions with other banks

16: What is another name for a bill of exchange?

A.   A savings account

B.   A checking account

C.   A certificate of deposit

D.   A check

17: Why are offshore banks often able to offer a client higher interest rates?

A.   Lower cost structure allows them to pay higher interest rates

B.   They give away all of their earnings to their clients

C.   They steal money from other clients to pay higher interest

D.   Their laws require them to pay higher rates

18: What is the government entity that insures bank balances?

A.   SEC


C.   IRS


19: What is meant by "restrictive endorsement"?

A.   Merely signing a check

B.   Indorsing a check with terminology limiting how the funds can be applied

C.   Writing a check out to a specific person

D.   Presenting a check to a bank

A.   An unconditional order, a specific amount, being payable to a specific person, being payable on a specific date

B.   Being payable to a specific person, being payable on a specific date, that both parties belong to the same bank, being payable in US currency

C.   A specific amount, being payable to a specific person, only in U.S. funds, for a specific good or service

D.   An unconditional order, being payable to a group of people, being payable on any given day in a 30 day time frame and for a specific amount

21: How is a money market account different from a savings account?

A.   Only rich people are allowed to have money market accounts

B.   Money market accounts are offered only by national banks, not by local banks

C.   Money market accounts always require some monthly fee, savings accounts do not

D.   A money market account earns a higher interest rate and typically has a limit on the number of transactions each month

22: Which of the following is not covered by the FDIC?

A.   A checking account

B.   Money market funds

C.   A savings account

D.   IRA

23: What does the term "Ex Gratia Payment" mean?

A.   An extra payment made during a month on a bank loan

B.   An extra interest payment made by the bank to customers

C.   A late payment on a loan

D.   Any payment made to an insured party for which an insurance company had no formal liability

24: 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?

A.   Default

B.   Collateral

C.   Indemnity

D.   Back pay

25: What type of account would someone who wants the facility to pay people through checks open?

A.   A savings account

B.   A checking account

C.   A money market account

D.   A stock account

26: What amount would someone who has $500,000 in one bank and $250,000 in another bank be insured for in total?

A.   $500,000: $500,000 from one bank and nothing from the other

B.   $500,000: $250,000 from each bank

C.   $250,000 in total regardless of the number of banks

D.   $250,000 in total as the smaller deposit is the only one covered

27: What method would a consumer most likely use to move funds between their offshore account and their domestic account?

A.   Mail cash

B.   Wire transfer

C.   Fly to the offshore country and withdraw it in person

D.   Go to the local branch of the offshore bank

28: Which of the following would not be covered by the FDIC?

A.   Checking accounts

B.   Joint savings accounts

C.   IRA

D.   U.S. Government investments such as treasury bills

29: What level will the FDIC insure any one person at a bank for beginning January 1, 2010?

A.   $50,000

B.   $100,000

C.   $250,000

D.   $1,000,000

30: What is the definition of an offshore bank?

A.   A bank located in a different state

B.   A virtual bank with no physical location

C.   A bank which only offers checking and no other services

D.   A bank located outside the country of the depositor, usually in a lower tax jurisdiction

31: What was the purpose of the 2006 Deposit Insurance Fund?

A.   To replace the FDIC

B.   To merge the two earlier funds namely the Bank Insurance Fund and the Savings Associations Insurance Fund

C.   To reduce consumer taxes on investment gains

D.   To promote the idea that consumers should be saving money

32: Why can't anyone start a new bank?

A.   The government allows only one new bank per year

B.   There is a limit on the number of banks allowed to be opened

C.   There is a freeze on opening new banks

D.   It is a regulated industry and a license is required before opening a new bank

33: What is a secondary way through which banks earn money?

A.   By selling memberships

B.   Through ad revenue from their site

C.   By paying lower interest on deposits and charging higher interest on advances

D.   By charging fees on accounts

34: What does the term "Netting" mean?

A.   Bringing in new customers to a bank

B.   Paying interest on an outstanding loan

C.   Combining an individual's bank accounts into one

D.   The offsetting with a counterparty or counterparties of financial obligations or payments one owes with those one is entitled to receive

35: What is meant by the term "Amortization"?

A.   Taking out a loan

B.   The reduction of debt by regular principal payments

C.   Payment of interest on a loan

D.   Buying negotiable instruments

36: What is the current maximum limit that the FDIC will insure any one person at a bank for?

A.   $50,000

B.   $100,000

C.   $250,000

D.   $1,000,000

37: Checking all bank account papers to make sure that the bank records and your records agree is known as:

A.   Credit check

B.   Credit rating

C.   Underwriting

D.   Reconciliation

38: What is meant by the term "Thrift"?

A.   A clearinghouse for checks

B.   An organization formed for the purpose of holding deposits for individuals

C.   A method of systematically saving money

D.   Writing checks for an amount and cashing them for a different amount

39: What is one criticism of offshore banking?

A.   No interest is earned on the account

B.   Difficult to set up

C.   It is often associated with organized crime

D.   It helps the economy in foreign nations

40: What is a "bill of exchange"?

A.   The same as a promissory note

B.   A written order by the Drawer to the Drawee to pay money to the Payee

C.   A loan agreement for property

D.   A verbal payment agreement

41: How have banks changed in recent years to respond to customer needs and wants?

A.   They have started offering fewer services

B.   They have started interacting more with customers by requiring people to come into the bank

C.   Banks have started providing investment and insurance services also to offer customers one stop shopping

D.   They have started charging higher interest rates

42: What is a "promissory note"?

A.   The same as a check

B.   The same as a draft

C.   A written promise by the maker to pay money to the payee.

D.   A loan agreement for property

43: Why do banks charge higher interest rates from customers with poorer credit?

A.   As a moral penalty

B.   To create a disparity between the rich and the poor

C.   Due to risk based pricing policy i.e. charging a higher rate from customers more likely to default

D.   To dissuade poor credit customers from banking

44: Why do offshore banks not save someone from paying taxes on the money in the account?

A.   The offshore bank will contact the U.S. government and inform them of what the customers are doing

B.   The U.S. tax law requires all citizens to pay taxes on both domestic and foreign earnings

C.   The offshore bank will collect taxes on behalf of the U.S. government None of the above

45: What is the definition of a negotiable instrument?

A.   The payee can negotiate what amount is actually deposited into their accounts; it does not have to be the amount stated

B.   A special type of contract for the payment of money capable of transfer by negotiation

C.   A contract for land

D.   A music instrument purchased through a draft

46: 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?

A.   $0

B.   $300,000

C.   $250,000

D.   $50,000

47: What amount would a customer be insured for if they made deposits to their accounts at three different locations of their bank?

A.   $250,000

B.   $750,000

C.   $0

D.   $50,000

48: What is an example of 'restrictive endorsement'?

A.   Signing a check

B.   Not signing a check

C.   Handing someone a check in their name

D.   Writing "for deposit only" on the back of a check

49: What is meant by the term "Clearing House"?

A.   The wire system used worldwide to clear wire transfers

B.   A central collection point where banks within a specified geographical area exchange checks with one another

C.   A place where the interest rate is determined

D.   None of the above

50: When was the FDIC established?

A.   1801

B.   1933

C.   2008

D.   1997