Banking Exam General 3 — Questions and Answers
Question 1: Which of the following is an example of a secured loan?
- Credit card debt
- Personal signature loan
- Mortgage (Correct answer)
- Student loan
Correct answer: Mortgage
A mortgage is secured by the property being purchased, which the lender can seize if the borrower defaults.
Question 2: What does the term 'amortization' refer to in banking?
- The process of closing a bank account
- Gradual repayment of a loan through scheduled payments covering principal and interest (Correct answer)
- Calculating compound interest on savings
- Converting foreign currency
Correct answer: Gradual repayment of a loan through scheduled payments covering principal and interest
Amortization is the process by which loan payments are structured so that each payment gradually reduces the principal balance.
Question 3: Which regulatory body charters and supervises national banks in the United States?
- FDIC
- Federal Reserve
- Office of the Comptroller of the Currency (OCC) (Correct answer)
- CFPB
Correct answer: Office of the Comptroller of the Currency (OCC)
The OCC charters, regulates, and supervises all national banks and federal savings associations.
Question 4: A bank's 'liquidity' refers to its ability to:
- Generate profits each quarter
- Meet short-term financial obligations without significant loss (Correct answer)
- Approve new loan applications quickly
- Invest in long-term securities
Correct answer: Meet short-term financial obligations without significant loss
Liquidity is a bank's ability to quickly convert assets to cash to meet depositor withdrawals and other obligations.
Question 5: What is 'collateral' in the context of a bank loan?
- The interest rate charged on the loan
- An asset pledged by the borrower to secure the loan (Correct answer)
- The co-signer on the loan
- The loan origination fee
Correct answer: An asset pledged by the borrower to secure the loan
Collateral is property or assets a borrower pledges to the lender, which can be seized if the borrower defaults.
Question 6: Which act established the Consumer Financial Protection Bureau (CFPB)?
- Glass-Steagall Act
- Dodd-Frank Wall Street Reform and Consumer Protection Act (Correct answer)
- Bank Secrecy Act
- Community Reinvestment Act
Correct answer: Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Act of 2010 created the CFPB to regulate consumer financial products and services.
Question 7: What does 'KYC' stand for in banking compliance?
- Keep Your Cash
- Know Your Customer (Correct answer)
- Key Yield Calculation
- Knowledge of Your Credit
Correct answer: Know Your Customer
KYC (Know Your Customer) is a mandatory process banks use to verify client identities and assess potential risks.
Banking Exam General 3
Which of the following is an example of a secured loan?