Banking Exam General 2

Question 1

Which federal agency insures deposits at most U.S. commercial banks up to $250,000 per depositor?

Accepted Answer

FDIC

Answer

The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per depositor, per insured bank.

Question 2

What is the primary purpose of a bank's reserve requirement?

Accepted Answer

Ensure banks maintain sufficient liquidity to meet depositor withdrawals

Answer

Reserve requirements ensure banks keep a minimum fraction of deposits on hand to meet customer withdrawal demands.

Question 3

A customer writes a check for more than their account balance. What is this called?

Accepted Answer

Overdraft

Answer

An overdraft occurs when a withdrawal or check exceeds the available balance in the account.

Question 4

What does APY stand for in banking?

Accepted Answer

Annual Percentage Yield

Answer

APY (Annual Percentage Yield) reflects the real rate of return on savings, accounting for compound interest.

Question 5

Which type of bank account typically offers the highest interest rate but restricts early withdrawals?

Accepted Answer

Certificate of Deposit (CD)

Answer

CDs offer higher interest rates in exchange for locking funds for a fixed term, with penalties for early withdrawal.

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