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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. Which type of life insurance policy offers both a death benefit and a cash value component that grows at a guaranteed rate?

    Answer: Whole life insurance

    Whole life insurance provides a permanent death benefit and builds cash value that grows at a guaranteed rate set by the insurer.

  2. A bank customer is considering a balloon mortgage. What is the defining characteristic of this loan?

    Answer: A large lump-sum payment is due at the end of the loan term

    A balloon mortgage has relatively low monthly payments during the term but requires a large lump-sum 'balloon' payment when the term ends.

  3. What is the primary regulatory purpose of the Truth in Savings Act (TISA) as it applies to deposit products?

    Answer: To require banks to disclose APY and account terms clearly to consumers

    TISA requires financial institutions to clearly disclose the APY, fees, and terms of deposit accounts so consumers can make informed comparisons.

  4. A customer purchases a $1,000 face-value bond at a discount for $950. If held to maturity, the extra $50 earned is called:

    Answer: Accretion

    When a bond purchased at a discount is held to maturity, the gradual increase in value toward face value is called accretion.

  5. Which product best suits a customer who wants market-linked growth potential while also having a guaranteed minimum interest rate?

    Answer: Fixed indexed annuity

    A fixed indexed annuity credits interest based on market index performance but guarantees a minimum rate, providing upside potential with downside protection.

  6. Under Regulation D (prior to 2020), savings accounts were limited to how many certain types of withdrawals or transfers per month?

    Answer: 6

    Regulation D historically limited savings and money market accounts to six convenient transfers or withdrawals per month; the Federal Reserve suspended this limit in April 2020 though many banks still apply it.

  7. A customer's bond portfolio loses value when the issuing company's credit rating is downgraded. This represents which type of risk?

    Answer: Credit (default) risk

    Credit risk (or default risk) is the risk that the bond issuer's financial condition deteriorates, causing the bond's value to fall or the issuer to default.