Capital One Assessment Test Fundamentals and Core Concepts 4

Question 1

Which of the following best describes 'net interest margin' (NIM) for a bank?

Accepted Answer

The difference between interest income earned and interest paid, divided by earning assets

Answer

NIM measures how effectively a bank invests its funds by comparing interest earned on loans to interest paid on deposits.

Question 2

Which act established the Consumer Financial Protection Bureau (CFPB)?

Accepted Answer

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer

The Dodd-Frank Act of 2010 created the CFPB to supervise and enforce federal consumer financial protection laws.

Question 3

What does 'credit risk' refer to in banking?

Accepted Answer

The risk that a borrower will fail to repay a loan as agreed

Answer

Credit risk is the possibility that a borrower defaults on their debt obligations, resulting in a loss for the lender.

Question 4

A customer makes only the minimum payment on a credit card balance each month. What is the primary consequence?

Accepted Answer

Interest accrues on the remaining balance, significantly extending payoff time

Answer

Paying only the minimum allows interest to compound on the remaining balance, potentially turning a small debt into a long-term burden.

Question 5

In Capital One's context, what does 'underwriting' involve?

Accepted Answer

Evaluating applicant risk to decide whether to approve credit and at what terms

Answer

Underwriting is the process of assessing a credit applicant's risk profile to determine approval, credit limit, and interest rate.

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