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Financial Institutions and Banking — Quiz Answers

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1
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Which is an example of predatory lending?

A
A teenager applies for a loan at her local bank branch but is told that she’s too young to apply without a parent’s approval.
B
A couple is charged a higher interest rate for a mortgage loan than another couple living in the same city.
C
A man opens a savings account, but when interest rates drop nationwide, his account doesn’t earn as much as he had hoped.
D
A woman fails to quality for a loan she needs in order to start a new business in her community.
2
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Why did the US Congress create the Federal Reserve System in 1913?

A
to establish a central bank that would provide loans for people who were denied them at local banks
B
to establish a central bank where American citizens could deposit their money
C
to establish a central bank to store the money used by the federal government
D
to establish a central bank that would help smaller banks survive during economic crises
3

Which equation shows the interest rate that Tran is paying? Tran got a loan of $10,000 from the bank to help pay for his new car. He agreed to pay $800 in interest for the use of this money.

A
10 comma 000 minus 800 is equal to 9 comma 200
B
10 comma 000 divided by 800 is equal to 12 point 5
C
10 comma 000 plus 800 is equal to 10 comma 800
D
800 divided by 10 comma 000 is equal to point 0 8
4

What is the relationship between the Fed and other banks?

A
The Fed monitors all deposits and loans at local banks to be sure they’re making a profit.
B
The Fed sets the salaries for employees at every bank in the nation.
C
The Fed makes sure that banks follow rules, and it loans money to banks that are in a crisis.
D
The Fed decides who is eligible for loans and who is not at various banks.
5

How does the Federal Deposit Insurance Company (FDIC) protect bank customers?

A
If customers can’t pay their bills, the FDIC provides them with short-term loans.
B
If a bank has a financial crisis, the FDIC safeguards its customers’ accounts.
C
If a bank can’t supply checkbooks, the FDIC can send them to customers.
D
If customers lose their credit cards, the FDIC supplies them with replacements.
6

Some savings accounts help depositors earn money. Where does this money come from?

A
from the interest that borrowers pay to a bank for a loan
B
from the central banking system, which is called the Fed
C
from other depositors’ money kept in the bank’s vault
D
from the federal government agency known as the FDIC
7

What is the definition of inflation?

A
when there are more products created than demand for them
B
when the interest rates on bank accounts rise
C
when there is an increase in the price of goods and services
D
when a company’s profits go up
8

How did the Mechanics and Farmers Bank of Durham, NC, differ from most other banks of the early 1900s?

A
It was established to service large corporations in the North Carolina area.
B
It was established by Black businessmen to serve their community.
C
It was the first to be insured by the Federal Deposit Insurance Corporation.
D
It was the first banking institution to charge interest for borrowing money.
9

What does a bank’s interest rate measure?

A
the cost of keeping a bank in business
B
the cost of depositing money in a bank
C
the cost of borrowing money from a bank
D
the cost of starting a new business
10

Why does the Fed sometimes increase interest rates?

A
to slow inflation by stopping the economy from growing too fast
B
to help more people get loans and become borrowers
C
to prevent banks from making profits that are too large
D
to speed up the economy and help it grow quickly

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