Understanding Different Types of Financial Institutions and Banking Systems, Exams of Nursing

Download Understanding Different Types of Financial Institutions and Banking Systems and more Exams Nursing in PDF only on Docsity! Banking and Financial Systems(Latest Exam 2024) What is a financial institution? - correct answers✅A financial institution is any organization that provides services related to money. What type of bank would a business owner likely use to deposit daily receipts as well as pay invoices and payroll? - correct answers✅A business owner would likely use a commercial bank to deposit daily receipts as well as pay invoices and payroll. How are money center banks chartered? - correct answers✅Money center banks are chartered as national banks by the Federal Office of the Comptroller of Currency (OCC). What type of bank typically has only one or two locations? - correct answers✅Unit banks typically have only one or two locations. PayPal is what type of payment system? - correct answers✅Paypal is a type of P2P payment system. bank - correct answers✅a type of financial institution Banking and Financial Systems(Latest Exam 2024) charter - correct answers✅a legal document issued by a federal and a state government that details how a bank is to be operated and how it will be regulated depository institution - correct answers✅a type of financial institution at which customers deposit money in order to withdraw it later. reserves - correct answers✅a percentage of the bank's funds that is kept to ensure that money will be available for customers and is not available for loans; AKA required reserves retail bank - correct answers✅a type of financial institution that provides services for customers, such as deposit accounts, mortgages, auto and personal loans, and credit cards. Internet bank - correct answers✅a financial institution with no physical location or building that customers access from anywhere with an Internet connection; AKA an online bank commercial bank - correct answers✅a financial institution owned by investors that focuses on business customers, providing bank accounts along with Banking and Financial Systems(Latest Exam 2024) 1) safekeeping services that protect our money 2) deposit services that let our money grow 3) loan services that allow us to borrow money What precautions do banks take to safe guard our money? - correct answers✅Precautions banks take to safeguard our money: - Surveillance - Nearly indestructible vaults - Alarm systems - Bulletproof glass on teller windows - Background checks of employees What is the primary source of income for most banks? - correct answers✅The primary source of income for most banks is interest from loans. What is the largest automated clearinghouse in the US? - correct answers✅The Federal Reserve Bank is the largest automated clearinghouse in the US. Which type of financial institution handles the most electronic funds transfers? - correct answers✅Banks handle the most electronic funds transfers. Banking and Financial Systems(Latest Exam 2024) debit card - correct answers✅a card that enables customers to electronically access the funds in their accounts at an ATM or to pay for goods and services in stores or online. banker's blanket bond - correct answers✅a type of insurance that covers a bank from losses due to robbery or theft. Federal Deposit Insurance Corporation (FDIC) - correct answers✅an independent Federal agency established in 1933 that provides deposit insurance up to $250,000 for depositors in insured banks and thrifts in the case of bank failure. financial intermediary - correct answers✅an institution that acts as a go-between in financial transactions electronic funds transfer (EFT) - correct answers✅any exchange of money from one account to another through computer-based systems that is started by electronic means automated clearinghouse (ACH) - correct answers✅electronic network for financial transactions Banking and Financial Systems(Latest Exam 2024) that processes credit and debit transactions, processes checks, and transfers funds between banks. What do financial institutions do? - correct answers✅Financial institutions conduct financial transactions such as investments, loans, and deposits. What are the three types of depository institutions? - correct answers✅Three type of depository institutions: - commercial banks - savings associations - credit unions Who owns commercial banks? - correct answers✅A commercial bank is owned by investors called stockholders. What was the original purpose of savings associations? - correct answers✅Savings associations were originally organized to help people save money Why was the FDIC established? - correct answers✅The FDIC was established to promote public confidence in the banks after the Great Depression Banking and Financial Systems(Latest Exam 2024) deposit insurance - correct answers✅insurance that covers the deposits of customers in the case of a bank failure deposit insurance fund (DIF) - correct answers✅arranges for depositors to maintain their insured funds in the case of bank failure. Depository institutions pay premiums to this fund in order to pool their money and share risk National Credit Union Share Insurance Fund (NCUSIF) - correct answers✅established in 1970 to insure credit union deposits up to $250,000 What are four types of non-depository institutions? - correct answers✅Four types of non-depository institutions: - investment banks - securities firms - finance companies - insurance companies How do investment banks help companies raise capital? - correct answers✅Investment banks help companies raise capital by issuing securities. Banking and Financial Systems(Latest Exam 2024) How do stockbrokers make their money? - correct answers✅Stockbrokers make their money through commission What is the primary business of finance companies? - correct answers✅The primary business of finance companies is issuing loans What are the two ways insurance companies earn income? - correct answers✅Two ways insurance companies earn income: - selling insurance policies - selling investment products non-depository institution - correct answers✅a type of financial institution that does not accept deposits but accepts money from customers for the purpose of investing in business deals in order to spread risk and provide means of investment securities - correct answers✅financial instruments that pay interest or give the investor part ownership of the company; issued by investment banks Banking and Financial Systems(Latest Exam 2024) bond - correct answers✅represents money a government or company has borrowed from the bondholder stock - correct answers✅a security that gives the purchaser part ownership in the company, known as equity dividend - correct answers✅a payment securities firm - correct answers✅a type of financial institution involved in the trading of securities in financial markets; also called a brokerage firm, stockbroker or bondbroker commission - correct answers✅a fee, such as the kind charged by a stockbroker for placing an order full-service brokerage firm - correct answers✅advises customers on which securities to buy and helps manage investments discount broker - correct answers✅stockbroker who places orders for customers at commissions lower than full-service brokers and may offer only limited services Banking and Financial Systems(Latest Exam 2024) List three of the fees a bank may charge for checking accounts. - correct answers✅Three of the fees a bank may charge for Checking accts: -Insufficient funds fees -Overdraft fees -Service fees asset - correct answers✅something owned by an individual or other entity interest - correct answers✅a fee charged for borrowing money maturity - correct answers✅the date on which a bond investor can receive the initial investment liquidity - correct answers✅the ability of a financial asset to be quickly converted into cash without any financial loss; having enough cash available to meet normal withdrawals gain - correct answers✅an increase in income that occurs when a bank sells a security for more than its purchase price. Banking and Financial Systems(Latest Exam 2024) insufficient funds fee - correct answers✅a fee charged by a bank when there is not enough money in an account to cover a transaction overdraft program - correct answers✅provides funds to cover a check written on an account with insufficient funds overdraft - correct answers✅a negative balance surcharge - correct answers✅a fee charged by an ATM when cash is withdrawn, AKA a convenience fee account inquiry fee - correct answers✅a fee charged to check an account balance at an ATM safe deposit box - correct answers✅an individually secured container usually kept within a bank vault to store valuables money order - correct answers✅an amount of money that is purchased in an exact amount payable to a specific party Banking and Financial Systems(Latest Exam 2024) inactivity fee - correct answers✅a fee charged if a customer does not make a transaction within a specified period Why do people purchase insurance? - correct answers✅People purchase insurance to protect from risk that can cause financial loss. How do banks make money from selling insurance? - correct answers✅Banks make money for selling insurance by collecting premiums on policies sold. What are the biggest costs associated with liability cases? - correct answers✅The biggest costs associated with liability cases is the legal costs. List the major services offered by bank trust departments. - correct answers✅Major services offered by bank trust department: - Retirement planning - Open IRA, 401 (k), variable annuity - Estate planning - Prepare a will or trust document that arranges for transfer of assets - Estate settlement Banking and Financial Systems(Latest Exam 2024) underwriting spread - correct answers✅the difference between the price paid by the investment bank and the price sold to the public merger - correct answers✅when two companies agree to combine acquisition - correct answers✅occurs when are company buys another company and sets itself up as the new owner What is the largest expense for banks? - correct answers✅The largest expense for banks is the interest paid on deposits What type of expense are utilities? - correct answers✅Utilities are an operating expense. Total income minus what equals profit? - correct answers✅Total income - total expenses = profit Why do banks pay interest to depositors? - correct answers✅Banks pay interest to depositors to entice them to use their bank rather than the competitor. And to have Banking and Financial Systems(Latest Exam 2024) that money to loan and then make income of the interest they charge. How can banks increase their profits? - correct answers✅Banks can increase their profit by increasing income and decreasing expenses interest expense - correct answers✅money that a bank pays to customers for the use of their money interest rate - correct answers✅a stated cost for the use of borrowed money that is a percentage paid on top of the initial amount. profit - correct answers✅when a bank's income exceeds its expenses operating expense - correct answers✅costs incurred to keep a bank in business, such as utilities, rent, and wages. What are the three functions of money? - correct answers✅The functions of money: - medium of exchange - unit of account Banking and Financial Systems(Latest Exam 2024) - store of value In order for barter to occur, what is necessary? - correct answers✅In order for a barter to occur, a coincidence of wants is necessary What does it mean to make counterfeit money? - correct answers✅To counterfeit money means to make a copy of money and represent it as the real thing. How does commodity money derive its value? - correct answers✅Commodity derives its value from the value of the item being used as currency. What is the most common type of money used today? - correct answers✅Fiat money is the most common type of money used today money - correct answers✅anything that is exchanged for goods or services medium of exchange - correct answers✅anything that is exchanged for goods and services, such as money Banking and Financial Systems(Latest Exam 2024) - M3 (time-related accounts greater than $100,000) What is the fractional reserve system? - correct answers✅The fractional reserve system is a system that requires that banks and other depository institutions keep a fraction of their deposits in reserve What are reserves? - correct answers✅Reserves are deposits kept back and not available to make loans How is money created? - correct answers✅Money is created by banks when they make loans If a bank's deposits increase by $2500 and the reserve requirement is 10%, what is the potential increase in the money supply? - correct answers✅2500 (deposit) - 250 (10% requirement) = 2250 (excess reserves/increase in money supply) money supply - correct answers✅the total amount of money available in an economy at a given time in. aggregates - correct answers✅the different measures that are compiled from a collection of data sources by which the money supply is measured. Banking and Financial Systems(Latest Exam 2024) prime rate - correct answers✅the interest rate that banks charge to their best customers fractional reserve system - correct answers✅a system that requires banks and other depository institutions to keep a fraction of their deposits in reserves excess reserve - correct answers✅the funds available for a bank to loan out after its reserve is met. reserve - correct answers✅a percentage of the bank's funds that is kept to ensure that money will be available for customers and is not available for loans; AKA required reserves money multiplier effect - correct answers✅the phenomenon that occurs when the new deposits increase the money supply by more than the original deposit inflation - correct answers✅when too much money in the economy result in rising prices Why were rural citizens oppose to the First Bank of the United States? - correct answers✅Rural citizens were Banking and Financial Systems(Latest Exam 2024) opposed to the First Bank of the United States because it took power away from the states and put it into the hands of eastern bankers. What did the US Supreme Court decide in McCullough v. Maryland? - correct answers✅In McCullough v. Maryland, the US Supreme Court decided that the creation of a central bank was within the power of Congress Why is the time from 1837 to 1863 known as the era of free banking? - correct answers✅The time from 1837 to 1863 was known as the era of free banking because all bank functions were handled by state banks. What two things did the Office of the Comptroller of the Currency accomplish when it was first created? - correct answers✅The Office of the Comptroller of the Currency created a uniform national currency and a system of national banks, when it was first created. How does a bank panic usually start? - correct answers✅A bank panic is usually started by a run on a single bank Banking and Financial Systems(Latest Exam 2024) What is the Federal Open Market Committee responsible for? - correct answers✅The Federal Open Market Committee creates monetary policy. Who are the members of the FOMC? - correct answers✅All seven members of the BOG are also members of the FOMC. Five additional members are chosen from the presidents of Federal Reserve Banks. Federal Reserve System - correct answers✅The central bank for the US that is responsible for the country's monetary system. AKA Fed monetary system - correct answers✅the mechanism a nation uses to provide and manage money for itself decentralization - correct answers✅occurs when a central authority shares power with regional and local authorities Federal Reserve Bank - correct answers✅One of the twelve regional branches of the Federal Reserve System that were created to avoid establishing a central bank in a single location Banking and Financial Systems(Latest Exam 2024) Board of Governors - correct answers✅the governing body of the Federal Reserve System Federal Open Market Committee - correct answers✅The body of the Federal Reserve System responsible for making monetary policy How does the Fed conduct monetary policy? - correct answers✅Three tools the Fed uses to conduct monetary policy: - open market operations - the discount rate - reserve requirements When is the discount rate set? - correct answers✅The discount rate is set every two weeks. What are some customer services offered by Federal Reserve Banks? - correct answers✅Customer services offered by Federal Reserve Banks: - Depositing a payroll check directly into a bank account - Automatic payment of some bills, (car, house, etc.) directly from the customer's account Banking and Financial Systems(Latest Exam 2024) What does the Fed do with the money it earns? - correct answers✅After the Fed pays its expenses, it gives the extra money to the US Treasury, where it is applied to the national debt. How does the Fed use its entire toolset to maintain the stability of the financial system? - correct answers✅The Fed monitors the economy, supervises and regulates member banks, and serves as the nation's bank to maintain the stability of the financial system monetary policy - correct answers✅regulations of a country's money supply to achieve economic goals and stability discount rate - correct answers✅the interest banks pay to borrow money from the Federal Reserve Bank prime rate - correct answers✅the interest rate that banks charge their best customers reserve requirement - correct answers✅the amount of money a bank must keep and not invest or loan out. Banking and Financial Systems(Latest Exam 2024) What are the two most important disclosures that are required under the Truth in Lending Act? - correct answers✅The two most important disclosures that required under the Truth in Lending Act are the annual percentage rate and the total finance charges on a loan. What is the purpose of the Fair Credit Reporting Act? - correct answers✅Protects consumer credit information According to the Fair Billing Act, how long does a consumer have to dispute an error to his or her account statement? - correct answers✅60 days Which law requires that credit card issuers state the monthly payment amount necessary to pay off a cardholder's existing balance in 36 months? - correct answers✅Credit Card Accountability, Responsibility, and Disclosure Act; Credit CARD Act Under the Equal Credit Opportunity Act, lenders may not discriminate against potential borrowers based on what factors? - correct answers✅- gender - marital status - race Banking and Financial Systems(Latest Exam 2024) - religion - age - national origin - whether an individual's income is from public assistance benefits Consumer Financial Protection Bureau (CFPB) - correct answers✅An independent consumer-protection organization that was created to protect the interests of consumers by making sure federal consumer-protection laws are enforced; it has the authority to ensure consumers get clear information about loans mortgages, credit cards, and other financial products and is also charged with ending deceptive practices in lending. Truth in Lending Act (TILA) - correct answers✅Also Title I of the Consumer Credit Protection Act. Required that all terms of and costs related to a loan must be provided to the consumer in writing; passed in 1968 annual percentage rate (APR) - correct answers✅The actual annual interest rate paid over the life of a loan. finance charge - correct answers✅The total dollar amount of interest and any other fees paid on the loan. Banking and Financial Systems(Latest Exam 2024) Fair Credit Reporting Act (FCRA) - correct answers✅Required that credit bureaus collect and distribute information in a fair and legal manner and provided processes for correcting credit report errors; enacted in 1971 Fair Credit Billing Act (FCBA) - correct answers✅Protected consumers from unfair billing practices and provided a way to correct billing errors; enacted in 1974 Credit CARD Act - correct answers✅Protected consumers from unfair and deceptive credit card practices and gave cardholders additional rights; enacted in 2009 Community Reinvestment Act - correct answers✅Prevented redlining by requiring that banks and other depository institutions show that they are serving the credit needs of all people in their market area; passed in 1977 Redlining - correct answers✅Occurs when a lender draws an imaginary red line on a map and does not make loans in that area. Banking and Financial Systems(Latest Exam 2024) negotiable order of withdrawal (NOW) account - correct answers✅Checking accounts that can pay interest Garn-St. Germain Act - correct answers✅Reduced bank regulations further and made it easier to save failing banks and savings associations; enacted in 1982 money market deposit account (MMDA) - correct answers✅A deposit account similar to a money market mutual fund except that it is FDIC insured. Interstate Banking Act - correct answers✅Also known as the Riegle-Neal Interstate Banking and Branching Efficiency Act; eliminated most restrictions on interstate bank branching, effectively overriding the McFadden Act; passed in 1997 Branching - correct answers✅Opening banking facilities away from a bank's home office. McFadden Act - correct answers✅Gave individual states the right to set their own rules regarding out-of-state banks coming into the state; enacted in 1927 Banking and Financial Systems(Latest Exam 2024) Gramm-Leach-Bliley Act - correct answers✅Also known as the Financial Services Modernization Act; repealed several key provisions of the Glass-Steagall Act and allowed banks to engage in almost any financial activity; passed in 1999 Dual banking system - correct answers✅Both state and federal governments pass and enforce bank laws E-compliance - correct answers✅Managing risks associated with electronic banking How long does it take to achieve a short-term goal? - correct answers✅Less than a year What factors are most important to savers with short- term goals? - correct answers✅Liquidity, convenience, safety of funds, and lack of fees What factor is most important to savers with long-term goals? - correct answers✅The interest rate Name the fee a bank pays to use a customer's money. - correct answers✅Interest Banking and Financial Systems(Latest Exam 2024) How often is interest compounded at most banks? - correct answers✅At least twice a year Savings - correct answers✅The portion of income that is not spent. Liquidity - correct answers✅The ability of a financial asset to be quickly converted into cash without any financial loss; having enough cash available to meet normal withdrawals. Interest - correct answers✅A fee charged for borrowing money. Deposit - correct answers✅Money placed or transferred into a bank account. Compound interest - correct answers✅Interest paid on interest Principal - correct answers✅An initial amount that is loaned or deposited Accrued interest - correct answers✅The amount added to the principal at regular time periods Banking and Financial Systems(Latest Exam 2024) Mature - correct answers✅When the fixed term of a CD expires and the account can be accessed without paying a penalty Penalty - correct answers✅A fee for breaking the terms of an account Jumbo CD - correct answers✅A CD for a large amount of money, usually $100,000 or more, with a high interest rate. Historically, how did individuals pay for retirement? - correct answers✅Social security benefits and company pension What is the main difference between a traditional IRA and a Roth IRA? - correct answers✅Traditional - funds are taxed when distributed Roth- funds are taxed when contributed. Why does a company provide benefits? - correct answers✅To attract and retain good employees Banking and Financial Systems(Latest Exam 2024) How does a business qualify to provide a SIMPLE IRA? - correct answers✅-must have no more than 100 employees -cannot have any other retirement plan When can an employee make an early withdrawal from his or her 401(k)? - correct answers✅In the case of financial hardship, distribution is limited to the employee's contributions Retirement - correct answers✅A person's withdrawal from active participation in a job or business Social security - correct answers✅A federal program that includes financial benefits intended to supplement retirement savings for Americans Pension - correct answers✅A fixed sum of money a company provides for its retired employees Defined benefit plan - correct answers✅A retirement savings plan with a fixed amount of money that is provided to retired employees and is determined by qualifications, not company profit. Banking and Financial Systems(Latest Exam 2024) Individual retirement account (IRA) - correct answers✅An interest-earning savings account in which income taxes are deferred on some deposits and all interest until all or part of the balance is withdrawn at retirement age. Compensation - correct answers✅Wages and financial benefits earned by working Contribution - correct answers✅An IRA deposit Distribution - correct answers✅An IRA withdrawal Benefits - correct answers✅Services, privileges, or rights that an employer provides in addition to the employee's wages or salary Defined contribution plan - correct answers✅A retirement savings plan with a fixed maximum amount that can be contributed each year. Simplified Employee Pension (SEP) - correct answers✅A retirement savings plan established by a business for its employees or owners to which the business directly contributes. Banking and Financial Systems(Latest Exam 2024) institution must balance the need to make money with the risk involved. List the types of commercial loans - correct answers✅- acquisition - acquisition and development - asset based - bridge - construction - development - construction improvement and rehab - Small Business Association (SBA) A credit card is considered what type of loan? Why? - correct answers✅Open-ended loan because the borrower need only make regular payments and the principal does not have to be paid in full. Why is collateral important to the bank when granting a loan to customers? - correct answers✅Under a secured loan, the bank has the right to take ownership of the collateral of the borrower does not repay. The bank can then sell the property to make up for the loss. Banking and Financial Systems(Latest Exam 2024) Why is an unsecured loan also known as a signature loan? - correct answers✅Because the borrower's promise to pay is shown by his or her signature on the loan agreement. Loan - correct answers✅Money temporarily transferred to a borrower in exchange for repayment and interest Principal - correct answers✅An initial amount of money that is loaned or deposited Loan policy - correct answers✅A guideline for balancing risk Consumer loan - correct answers✅A loan made when an individual borrows money for his or her use Commercial loan - correct answers✅A loan made when a company borrows money Open-ended loan - correct answers✅A loan that does not have to be paid in full by a specific date Closed-ended loan - correct answers✅A loan that must be paid in full on a specific date Banking and Financial Systems(Latest Exam 2024) Installment loan - correct answers✅A type of closed- ended loan for a large amount of money that is repaid smaller amounts over a specified period of time. Secured loan - correct answers✅A loan backed by the borrower's property Collateral - correct answers✅A borrower's property that is pledged to secure a loan Unsecured loan - correct answers✅A loan that is not backed by collateral, only the borrower's signature; AKA signature loan Small Business Administration (SBA) - correct answers✅An independent agency of the federal government that was created in 1953 to help Americans start and grow businesses, often in the form of loans. Export-Import Bank of the United States (Ex-Im Bank) - correct answers✅An independent federal agency established in 1934 to assist US businesses by financing the export of US products, supporting US companies engaged in the overseas export of goods and services, offering loans to US companies, providing guarantees Banking and Financial Systems(Latest Exam 2024) Fixed-rate mortgage - correct answers✅A mortgage loan in which the interest rate stays the same for the entirety of the loan's term. Adjustable-rate mortgage (ARM) - correct answers✅A mortgage loan in which the interest rate may change over the life of the loan. Cap - correct answers✅The maximum increase that can be applied to a monthly loan payment, or the maximum interest rate increase the rate is adjusted Term - correct answers✅The number of years a loan will exist. Closing costs - correct answers✅Several fees that are applied when a mortgage is signed. Equity - correct answers✅The difference between real estate's value and the amount owed for the real estate; equity belongs to the owner. Equity loan - correct answers✅A loan that temporarily transfers cash to the borrower and is secured by the Banking and Financial Systems(Latest Exam 2024) owner's equity; sometimes referred to as a second mortgage. List the five C's of credit. - correct answers✅Character Capacity Capital Collateral Conditions What are three things that would show an applicant has good character? - correct answers✅Have experience as a borrower, pay bills on time, and demonstrate stability in home and work arrangements. How does a FICO score affect a loan application? - correct answers✅A higher score means lower risk for the bank and it should be approved. A lower score means more risk for the bank and if the loan is approved, higher interest rates. When considering the risk posed by a commercial loan, what three things do lenders look at? - correct answers✅Company/organization's cash flow, collateral, and commercial debt ratio. Banking and Financial Systems(Latest Exam 2024) Why would an applicant ask someone to cosign a loan application? - correct answers✅The cosigner's better credit score will get the loan approved. Creditworthiness - correct answers✅An assessment of a borrower's ability to repay a loan. Character - correct answers✅A loan applicant's honesty and integrity as shown by how she or he handled debt. Capacity - correct answers✅A loan applicant's ability to pay debts as shown by cash flow Capital - correct answers✅A loan applicant's money, property, and other valuables. Conditions - correct answers✅The overall environment in which a loan will be given. Credit score - correct answers✅A measure of risk based on a borrower's credit history. Risk - correct answers✅The chance that an unfavorable event will happen to a person or property. Banking and Financial Systems(Latest Exam 2024) Annual percentage rate (APR) - correct answers✅The actual annual interested rate paid over the life of a loan. Periodic interest rate - correct answers✅The interest rate the lender applies to a loan's outstanding balance to calculate the finance charge each billing period. Finance charges - correct answers✅The total dollar amount of interest and any other fees paid on the loan Average daily balance method - correct answers✅A way to calculate finance charges by using the card's beginning daily balance Previous balance method - correct answers✅A way to calculate finance charges by using the amount the customer owed at the end of the previous billing period to calculate the interest owed for the current month. Adjusted balance method - correct answers✅A way to calculate finance charges by using the balance from the previous month and subtracting payments made during the current period. Banking and Financial Systems(Latest Exam 2024) Default - correct answers✅Occurs when a borrower fails to meet the terms of a loan agreement. Bankruptcy - correct answers✅A legal procedure that enables individuals or companies to eliminate or repay some or all debt under the guidance of federal bankruptcy courts. Reorganization - correct answers✅The process of creating a repayment plan to repay debts without liquidating property. What elements must be in a negotiable instrument? - correct answers✅- authorized signature - specific amount - unconditional promise to pay - payment date - payee If a date is not specified in a negotiable instrument, when is it paid? - correct answers✅The negotiable instrument is paid on demand What are the two types of negotiable instruments? - correct answers✅Drafts and notes Banking and Financial Systems(Latest Exam 2024) How is a money order different from a traveler's check? - correct answers✅They are not used as cash because the cannot be refunded if lost or stolen Why is a CD considered a negotiable instrument from the bank's perspective? - correct answers✅The bank is the maker, providing an unconditional promise to repay the customer's deposit, plus interest, on a specific date. It's promised, not ordered, so it is a note. Negotiable instrument - correct answers✅A transferable, signed document that represents the promise to pay a specific amount of money in the future or on demand. On demand - correct answers✅A payment made when requested Payee - correct answers✅The entity receiving the money Bearer instrument - correct answers✅A negotiable instrument that is payable on demand to whoever has it. Banking and Financial Systems(Latest Exam 2024) ABA routing number - correct answers✅A nine-digit number by the American Banker Association (ABA) to identify the financial institution responsible for paying the value of a check to the payee. endorsement - correct answers✅the signature used to legally transfer the value of a check blank endorsement - correct answers✅the payee's signature restricted endorsement - correct answers✅An endorsement with added limitations on what can be done with the check when it is presented to a bank. third-party endorsement - correct answers✅An endorsement that transfers the payee's claim to the check's value to a third party. clearing - correct answers✅the process of approving a check and transferring funds from one account to another. cancelled check - correct answers✅a check that has been cleared Banking and Financial Systems(Latest Exam 2024) automated clearinghouse (ACH) - correct answers✅Electronic network for financial transactions that processes credit and debit transactions, processes checks, and transfers funds between banks. substitute check - correct answers✅A paper copy of the front and back of the original check image replacement document (IRD) - correct answers✅another term for a substitute check, usually an electronic copy. How are ATMs a source of income for the bank? - correct answers✅Customers are typically charged a service fee for using ATMs belonging to other banks. What are two advantages of direct deposit from an employee's standpoint? - correct answers✅First, funds are immediately available since a check does not need to clear. Second, direct deposit is safe because it eliminates the need to transport a check. How does the Federal Reserve Wire Network participate in wire transfers? - correct answers✅It connects the Federal Reserve Board of Governors, the Federal Reserve Banking and Financial Systems(Latest Exam 2024) Banks and their branches, the US Department of the Treasury, and member depository institutions. What is the difference between automatic payments and a bill-payment service? - correct answers✅Automatic payment are set up by the customer once and all subsequent payments are made without additional action by the customer or vendor. When using a bill-payment service, the electronic transfer of funds from a customer's account to a vendor's account must be requested by the customer or the vendor each time a payment is due. How is a debit card different from a credit card? - correct answers✅Customers who use debit cards are not billed later like customers who use credit cards. Instead, money is immediately withdrawn from the customer's account and deposited in the vendor's account when the purchase is made. payment system - correct answers✅Method of transferring funds without cash cash card - correct answers✅A plastic card with a magnetic strip that can be read by an ATM Banking and Financial Systems(Latest Exam 2024) manager - correct answers✅A bank employee who is in charge of a segment of a business responsibility - correct answers✅The duty to complete an assigned task well authority - correct answers✅The power to affect or direct a situation or a worker's behavior executive - correct answers✅A manager who has the responsibility and authority to make decisions about the bank and how it conducts its business. board of directors - correct answers✅A group of individuals elected by a bank's shareholders to represent the shareholders and guide the bank's policies and business decisions. Which position in a bank is responsible for front-line operational support - correct answers✅Tellers What are three hazards that safe deposit boxes protect their contents from? - correct answers✅Fire, flood, and theft Banking and Financial Systems(Latest Exam 2024) How do banks used FedCash services? - correct answers✅Ordering additional currency and coins to meet the needs of customers What are the three options a bank has if a borrower is unable to repay a loan? - correct answers✅- take the property if the loan was secured - negotiate with the borrower - take court action to recover lost funds What role does a compliance department play in a bank? - correct answers✅Ensures the bank meets new and updated rules cash drawer - correct answers✅A drawer with separate compartments for different denominations of coins and bills collection - correct answers✅The transfer of past-due loans to a bank department or outside agency that attempts to gather full or partial repayment of the loan foreclosure - correct answers✅The legal process of ending an owner's right to a property and transferring it to the lender Banking and Financial Systems(Latest Exam 2024) repossession - correct answers✅Occurs when a bank takes property from a borrower who is not able to repay a loan; generally refers to a car or other vehicle that was purchased with the loan or used as security for a loan. garnishment - correct answers✅Withholding all or part of a borrower's salary to pay an outstanding debt compliance - correct answers✅The process of following laws and regulations. What are the steps in recruiting and hiring a new employee? - correct answers✅- Recruit applicants - Interview selected applicants - Verify references - Hire the best applicant List five recruiting methods - correct answers✅- promotions - media advertising - job fairs - college visits - employment agencies Banking and Financial Systems(Latest Exam 2024) Why is setting up a target market helpful in marketing the bank? - correct answers✅To create a CUSTOMER from a CONSUMER, a bank needs to be able to give the consumer what he or she needs. What does a market segment of consumers have in common? - correct answers✅Common wants and needs How have the methods and locations for promoting a product changed? - correct answers✅In the past, promotion relied heavily on advertising. Advertising meant promotions on television and radio or in newspapers and magazines. Today, promotion is more dynamic. Advertising is only one option. Promotions can include almost any activity. When must the phrase "Member FDIC" appear in a bank's communications? - correct answers✅In anything that promotes a deposit account or the bank as a whole. Must also appear on the homepage of the bank's website. Why is cross-selling sometimes referred to as relationship-based selling? - correct answers✅Cross- selling is the result of an existing relationship formed by selling a bank product or service to a customer. Banking and Financial Systems(Latest Exam 2024) need - correct answers✅Something a person must have to survive want - correct answers✅Something a person would like to have, but does not need to survive market segment - correct answers✅A group of consumers that share common wants and needs target market - correct answers✅The market segment that will be the focus of a marketing strategy advertising - correct answers✅Calling attention to a product or service, commonly through the use of paid advertisements marketing - correct answers✅The process of introducing a product or service to the consumers who can purchase it. promotion - correct answers✅an activity that increases consumer awareness of a product Banking and Financial Systems(Latest Exam 2024) cross-selling - correct answers✅A marketing strategy that encourages existing customers to buy new products or services based on their previous purchases event-based selling - correct answers✅A marketing strategy that encourages bank representatives to contact a customer when an event occurs How does a positive public image help a bank? - correct answers✅A positive public image makes it easier to hire and retain employees, acquire new customers, and keep current customers List four ways that banks engage with the communities they serve. - correct answers✅Banks often sponsor community events, such as marathons. They provide ongoing financial education to consumers. Bank executives often serve on civic boards and local chambers of commerce. Another way banks affect their communities is through the customer service they provide. How do banks control word-of-mouth advertising? - correct answers✅The only control banks have over word-of-mouth advertising is the customer service they provide. It is up to the bank to foster positive Banking and Financial Systems(Latest Exam 2024) What previous career experience may help someone to become a CTO? - correct answers✅Experience as an information technology manager. chief executive officer (CEO) - correct answers✅A bank executive who is appointed by a corporate board of directors and is accountable to the corporation's stockholders, the public it serves, and legal authorities for the actions of the bank. chief operating office (COO) - correct answers✅A bank executive responsible for the bank's daily operations and performance president - correct answers✅A bank executive who often serves in the role of CEO or COO chief financial officer (CFO) - correct answers✅A bank executive responsible for financial planning, control, and record keeping for the bank chief technology officer (CTO) - correct answers✅A bank executive responsible for developing new technology for use by the bank. Banking and Financial Systems(Latest Exam 2024) chief information officer (CIO) - correct answers✅A bank executive involved in the technology the bank currently uses and responsible for solving issues with implementing new technology. What role does a compliance officer play in the banking industry? - correct answers✅This person establishes how the bank will implement strategies for complying with laws and regulations and for completing the necessary reporting. In addition to general knowledge of business, what else must a trust officer know to be a success? - correct answers✅Investing, estate planning, and tax codes and laws, especially probate laws. Why is experience as a lending officer particularly helpful for someone who wants to move up in the banking industry? - correct answers✅Many upper-management positions are filled by people with experience as lending officers. Who do mortgage bankers most frequently deal with? - correct answers✅Real estate professionals and the person or business seeking the mortgage. Banking and Financial Systems(Latest Exam 2024) What criteria do underwriters use to determine if a loan is approved? - correct answers✅An applicant's creditworthiness. compliance officer - correct answers✅A bank employee who ensures the bank follows all state and federal laws and regulation, and implements strategies for compliance and reporting. trust officer - correct answers✅A bank employee responsible for providing customers with financial products and trust services lending officer - correct answers✅A bank employee who evaluates applications for loans or lines of credit; AKA loan officer mortgage banker - correct answers✅A bank employee similar to a lending officer who deals only with mortgage loans underwriter - correct answers✅A bank employee who reviews loan applications and approves or denies a loan. Banking and Financial Systems(Latest Exam 2024) What interpersonal skills must a credit counselor have? - correct answers✅ List four functions that define a bank - correct answers✅-safeguarding funds -transferring funds -exchanging money -lending money What three factors in modern banking have changed the industry? - correct answers✅-Mergers -Technology -Competition In what ways is a bank like any other business? In what ways is it different from other businesses? - correct answers✅Banks, like any other business, sell their services to make money, and they market and manage those services in a competitive field. Banks are financial intermediaries essential to our economy. Why do governments regulate banks? - correct answers✅Banks are essential to our society, our economy, and even the security of our government. Banking and Financial Systems(Latest Exam 2024) What challenges does the trend mergers pose toward banks? What skills will these challenges require of those making careers in banking? - correct answers✅Smaller banks with limited resources will have to find unique ways to compete with the larger banks. The larger banks will have to find efficient ways to manage increased resources in multiple locations. Employees of large banks may become more specialized in certain areas. Name five ways banks safeguard money - correct answers✅record keeping, identification, enforcement, transfer security, sound business practices.