finace banking

1. A prime rate is the

a) Interest rate charged by banks to their most creditworthy customers.

2. What is the difference between gross income and net income?

c) Gross income is the total before deductions, while net income is what is left after taxes and deductions.

3. Which of the following correctly describes the FDIC’s role?

a) It insures individuals’ savings up to a specific limit in case of bank failure.

4. When does a person typically face an early withdrawal penalty?

a) Withdrawing funds from a Roth IRA before age 59½

5. If a person fails to repay a loan according to the terms, what is the resulting status?

c) Default

6. Which financial product typically earns compound interest?

b) Certificate of Deposit (CD)

7. Which of the following best describes Annual Percentage Yield (APY)?

c) The rate of return on an investment over a year, including the effect of compounding interest.

8. What differentiates an adjustable,rate mortgage (ARM) from a fixed

rate mortgage?

9.When does an overdraft occur?

b) When a check is processed after the account has insufficient funds

10. What is a mortgage loan?

b) A loan used to purchase real estate

11. A money market account usually offers:

b) Higher interest rates in exchange for higher minimum balances

12. What does FICA stand for?

b) Federal Insurance Contributions Act

13. What does FICA do?

c) It funds Social Security and Medicare programs.

14. Which of the following best defines compound interest?

b) Interest calculated on both the initial principal and accumulated interest

15. What is a beneficiary?

b) A person designated to receive assets or funds after the account holder's death

16. What is a 401(k) plan?

b) A retirement savings plan where employees can contribute pre

17. What distinguishes a Roth IRA from a traditional IRA?

b) Contributions are made after taxes, and withdrawals in retirement are tax

18. A Certificate of Deposit (CD) is a type of savings account that earns higher interest but restricts access to funds for a certain period.

True

19. A credit limit is the maximum amount a customer can withdraw from their checking account.

False

20. Medicare is a program designed to help individuals with disabilities and those over 65 with medical expenses.

True

21. An interest

bearing account does not earn any interest over time.

22. Net income is the amount of money left after taxes and deductions are subtracted from gross income.

True

23. Simple interest is interest that is calculated on both the initial principal and the accumulated interest.

False

24. A routing number is a unique code used to identify a specific financial institution.

True

25. A bounced check refers to a check that is processed but has insufficient funds to cover the amount.

True

26. An adjustable,rate mortgage (ARM) has an interest rate that changes over time, often based on a market index.

True

27. A Certificate of Deposit (CD) allows you to withdraw money at any time without penalty, but with limited interest.

False

28. Social Security benefits are funded through payroll taxes, as required by FICA.

True