Practice Test GeeksBanking Practice Test
← All Banking Flashcard Decks

Financial Products Flashcards

7 cards from real Banking practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Products flashcards as text

  1. A customer deposits $10,000 in a CD with an annual interest rate of 5% compounded quarterly. What concept describes earning interest on previously earned interest?

    Answer: Compound interest

    Compound interest is interest calculated on both the principal and previously accumulated interest, accelerating growth over time.

  2. What is the primary difference between a secured credit card and a standard unsecured credit card?

    Answer: Secured cards require a cash deposit as collateral

    A secured credit card requires the cardholder to provide a cash deposit that typically equals the credit limit, serving as collateral.

  3. Which of the following is true about U.S. Treasury bonds offered through a bank?

    Answer: Interest is exempt from state and local income taxes

    Interest earned on U.S. Treasury bonds is subject to federal income tax but exempt from state and local income taxes.

  4. A customer is 55 years old and wants to draw income from their annuity immediately. Which type should they select?

    Answer: Immediate annuity

    An immediate annuity begins making income payments shortly after a lump-sum premium is paid, making it suitable for customers who need income now.

  5. What is the main risk associated with a callable CD from the investor's perspective?

    Answer: The bank may redeem the CD early, forcing reinvestment at lower rates

    A callable CD can be redeemed by the issuing bank before maturity, which often happens when rates fall, exposing investors to reinvestment risk.

  6. Which product allows a homeowner to convert home equity into cash without requiring monthly loan payments during the loan term?

    Answer: Reverse mortgage

    A reverse mortgage allows homeowners aged 62+ to access home equity without monthly payments; the loan is repaid when the home is sold or the borrower leaves.

  7. A money market account typically differs from a regular savings account in that it:

    Answer: Often pays higher rates and may allow limited check-writing

    Money market accounts generally offer higher interest rates than regular savings accounts and often include limited check-writing or debit card privileges.