RBC RBC - Online Assessment Financial Literacy and Banking Knowledge Questions and Answers 1

Question 1

What does the term 'prime rate' refer to in the context of Canadian banking?

Accepted Answer

The benchmark interest rate set by the Bank of Canada used by banks to price loans

Answer

The prime rate is a benchmark lending rate influenced by the Bank of Canada's overnight rate, used by banks like RBC to price variable-rate loans and lines of credit.

Question 2

Which of the following best describes a Registered Retirement Savings Plan (RRSP)?

Accepted Answer

A tax-sheltered savings account where contributions reduce taxable income

Answer

An RRSP is a tax-sheltered account where contributions are deductible from taxable income and investments grow tax-free until withdrawal.

Question 3

A client wants low risk and guaranteed returns over 1 year. Which product is MOST suitable?

Accepted Answer

Guaranteed Investment Certificate (GIC)

Answer

A GIC offers a guaranteed rate of return for a fixed term, making it the safest option for a client prioritizing capital preservation over a 1-year horizon.

Question 4

What is the primary purpose of the Canada Deposit Insurance Corporation (CDIC)?

Accepted Answer

To insure eligible deposits at member institutions up to a set limit per depositor

Answer

CDIC protects eligible deposits at member institutions (including RBC) up to $100,000 per depositor category in the event of a bank failure.

Question 5

Which ratio is most commonly used to assess a borrower's ability to service debt relative to income?

Accepted Answer

Debt service coverage ratio (DSCR)

Answer

The debt service coverage ratio measures whether a borrower's income is sufficient to cover debt payments, making it a key underwriting metric.

RBC - Online Assessment Practice Test

RBC - Online Assessment Practice Test

RBC RBC - Online Assessment Financial Literacy and Banking Knowledge Questions and Answers 1