Banking Financial Products 5

Question 1

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

Accepted Answer

Whole life insurance

Answer

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

Question 2

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

Accepted Answer

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

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 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:

Accepted Answer

Accretion

Answer

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

Question 5

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

Accepted Answer

Fixed indexed annuity

Answer

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

Banking Practice Test

Banking Practice Test

Banking Financial Products 5