LSU FIN 3632 ANDREWS FINAL MULTIPLE CHOICE

What is the primary purpose of the Federal Reserve in relation to banks?

a) Issuing loans

b) Determining and applying monetary policy

c) Providing customer service

d) Selling investments

b) Determining and applying monetary policy

What is NOT considered a bank liability?

a) Deposits

b) Loans

c) Taxes payable

d) Dividends payable

b) Loans

Which loan is typically secured by real estate and has a long-term repayment schedule?

a) Credit card

b) Construction loan

c) Mortgage loan

d) Auto loan

c) Mortgage loan

Which law requires banks to implement a customer identification program (CIP)?

a) Dodd-Frank Act

b) Sarbanes-Oxley Act

c) USA PATRIOT Act

d) Gramm-Leach-Bliley Act

c) USA PATRIOT Act

Which of the following is an example of phishing?

a) Redirecting a URL to a bogus site

b) Emailing fake websites to gather personal info

c) Making unauthorized wire transfers

d) Stealing a physical debit card

b) Emailing fake websites to gather personal info

What is the goal of cross-selling in banking?

a) Offer insurance products

b) Encourage ATM usage

c) Sell investment portfolios

d) Build long-term customer relationships

d) Build long-term customer relationships

Which act was passed to improve corporate governance after accounting scandals?

a) Bank Secrecy Act

b) Dodd-Frank Act

c) Sarbanes-Oxley Act

d) Fair Credit Reporting Act

c) Sarbanes-Oxley Act

What are typical consumer loan categories?

a) Auto loan and business loan

b) Mortgage loan and lease financing

c) Credit card and HELOC

d) Cashier's check and promissory notes

c) Credit card and HELOC

What distinguishes secured credit from unsecured credit?

a) Unsecured loans require a credit check

b) Secured credit is backed by collateral

c) Secured loans are always long-term

d) Unsecured loans are illegal

b) Secured credit is backed by collateral

What do the "Red Flag Rules" refer to in banking?

a) Laws against phishing

b) Requirements for identity theft prevention programs

c) Loan underwriting guidelines

d) Marketing restrictions

b) Requirements for identity theft prevention programs

What is a key reason banks are considered financial intermediaries?

a) They create money

b) They take deposits and make loans

c) They set interest rates

d) They regulate the economy

b) They take deposits and make loans

Which of the following is a bank asset?

a) Deposits

b) Taxes payable

c) Loans

d) Dividends payable

c) Loans

What are matched funding strategies designed to manage?

a) Reputation risk

b) Market share

c) Liquidity and income

d) Legal compliance

c) Liquidity and income

What is one primary source of bank income?

a) Interest paid on deposits

b) Occupancy expense

c) Service charges

d) Wages and benefits

c) Service charges

Which of the following is a short-term liability for a bank?

a) Fixed assets

b) Dividends payable

c) Loans

d) Lease financing

b) Dividends payable

Why are consumer loans attractive to banks?

a) They are risk-free

b) They always have collateral

c) They support cross-selling

d) They have no regulation

c) They support cross-selling

What does HELOC stand for?

a) Home Equity Line of Credit

b) High Earnings Loan on Credit

c) Home Emergency Loan of Credit

d) House Equity Lending Option Credit

a) Home Equity Line of Credit

What is a key feature of construction loans?

a) Long-term fixed rates

b) No collateral

c) Short-term with interest-only payments

d) Guaranteed by government

c) Short-term with interest-only payments

What distinguishes an ARM from a fixed-rate mortgage?

a) ARM rates remain constant

b) ARMs are illegal in some states

c) ARMs have adjustable interest rates

d) Fixed-rate loans fluctuate annually

c) ARMs have adjustable interest rates

Which loan type is typically used to fund equipment or real estate for a business?

a) Line of credit

b) Working capital loan

c) Term loan

d) Credit card

c) Term loan

Which government program supports small business lending?

a) FDIC

b) SBA

c) CRA

d) HUD

b) SBA

Which is a benefit of a line of credit to a business?

a) High interest earnings

b) Long-term asset financing

c) Flexible short-term borrowing

d) Requires no approval

c) Flexible short-term borrowing

What role does the bank board of directors play in lending?

a) Handles marketing

b) Manages customer service

c) Governs loan policy

d) Approves all loans

c) Governs loan policy

Which of the following is considered open-ended credit?

a) Auto loan

b) Mortgage

c) Credit card

d) Installment loan

c) Credit card

What does amortizing debt involve?

a) Revolving balance

b) One-time payment

c) Regular payments that reduce principal

d) Unsecured borrowing

c) Regular payments that reduce principal

Which of the following is a purpose of the Community Reinvestment Act (CRA)?

a) Ensure fair access to credit in low- and moderate-income areas

b) Measure a bank's profitability

c) Set interest rates for all bank loans

d) Fund high-risk investments

a) Ensure fair access to credit in low- and moderate-income areas

What is a key element of meeting customer expectations in banking?

a) Selling proprietary investments

b) Aggressive upselling

c) Responsive service and problem resolution

d) Avoiding regulations

c) Responsive service and problem resolution

What is the role of professional appearance in banking?

a) Attracting high-net-worth clients only

b) Meeting regulatory requirements

c) Establishing trust and credibility

d) Reducing compliance costs

c) Establishing trust and credibility

Which is an example of cross-selling?

a) Offering a mortgage to someone opening a checking account

b) Sending monthly statements

c) Paying interest on deposits

d) Auditing customer accounts

a) Offering a mortgage to someone opening a checking account

What does the Fair Credit Reporting Act regulate?

a) Credit card APR rates

b) Credit bureau reporting and accuracy

c) Bank capital requirements

d) Mortgage tax deductions

b) Credit bureau reporting and accuracy

Which federal agency enforces rules around deceptive marketing practices?

a) FDIC

b) OCC

c) CFPB

d) SEC

c) CFPB

Which marketing law prevents unsolicited commercial emails?

a) GLB Act

b) CAN-SPAM Act

c) USA PATRIOT Act

d) SOX

b) CAN-SPAM Act

What is phishing designed to do?

a) Redirect physical mail

b) Steal personal info through fake emails or sites

c) Eliminate bank fees

d) Replace authentication systems

b) Steal personal info through fake emails or sites

What is spoofing in the context of telephone fraud?

a) Redirecting mail to fake addresses

b) Manipulating Caller ID to trick recipients

c) Using voice assistants to monitor calls

d) Encrypting all bank communication

b) Manipulating Caller ID to trick recipients

What's the purpose of a Suspicious Activity Report (SAR)?

a) Report fraudulent marketing

b) Document and notify regulators of potentially illegal financial activities

c) Monitor employee performance

d) Request tax extensions

b) Document and notify regulators of potentially illegal financial activities

What does the Bank Secrecy Act require banks to do?

a) File customer lawsuits

b) Monitor and report suspicious activity

c) Pay interest on all deposit accounts

d) Issue new loans quarterly

b) Monitor and report suspicious activity

Which of the following is an identity theft prevention measure?

a) Promissory notes

b) Open-ended credit lines

c) Multi-factor authentication

d) Paper statements only

c) Multi-factor authentication

Which act added the requirement to detect "abusive" financial practices?

a) Sarbanes-Oxley Act

b) Truth in Lending Act

c) Dodd-Frank Act

d) Gramm-Leach-Bliley Act

c) Dodd-Frank Act

How does a reverse mortgage work?

a) Bank lends based on home equity and collects upon sale or death

b) Customer pays mortgage monthly with fixed interest

c) Used for commercial property only

d) Bank buys home outright

a) Bank lends based on home equity and collects upon sale or death

What makes business email compromise (BEC) dangerous?

a) It uses fake checks

b) It impersonates executives to authorize fraudulent transfers

c) It's a type of spyware

d) It encrypts data for ransom

b) It impersonates executives to authorize fraudulent transfers

What is the goal of Regulation P under GLB Act?

a) Set capital reserve levels

b) Restrict customer information sharing with third parties

c) Prevent phishing scams

d) Regulate real estate lending

b) Restrict customer information sharing with third parties

Which scam involves asking for fees in exchange for a promised reward?

a) Advance fee fraud

b) Phishing

c) Card skimming

d) Prime bank note fraud

a) Advance fee fraud

What distinguishes pharming from phishing?

a) Pharming redirects users to fake sites automatically

b) Pharming uses voice calls

c) Pharming only targets mobile users

d) Pharming affects physical checks

a) Pharming redirects users to fake sites automatically

Why do banks perform pre-employment screening?

a) To assess credit scores

b) To meet SOX revenue goals

c) To identify risks from new hires

d) To promote internal hires

c) To identify risks from new hires

Why is synthetic identity fraud difficult to detect?

a) It uses only real personal data

b) It uses a blend of real and fake data to create valid-looking identities

c) It never involves credit applications

d) It affects only minors

b) It uses a blend of real and fake data to create valid-looking identities

What is a key feature of ransomware attacks on banks?

a) They request new account creation

b) They impersonate auditors

c) They encrypt systems or threaten to leak data

d) They file false tax reports

c) They encrypt systems or threaten to leak data

Why do banks need vendor management programs?

a) Vendors are always trustworthy

b) Vendors must offer investment advice

c) Vendors introduce third-party risk

d) Vendors sign customer accounts

c) Vendors introduce third-party risk

What is the primary concern of climate risk in banking?

a) High utility bills

b) Reduced interest rates

c) Natural disasters impacting loan portfolios

d) Rising employee turnover

c) Natural disasters impacting loan portfolios

What is the purpose of a customer due diligence program?

a) Lower tax burden

b) Faster transactions

c) Monitor for suspicious behavior and ensure legitimacy

d) Offer insurance discounts

c) Monitor for suspicious behavior and ensure legitimacy

Which act governs fair access to consumer credit reports?

a) Truth in Lending Act

b) Gramm-Leach-Bliley Act

c) Fair Credit Reporting Act

d) Sarbanes-Oxley

c) Fair Credit Reporting Act

Which of the following is NOT a type of fraud scheme discussed in banking?

a) Bank card fraud

b) Loan flipping

c) Advance fee fraud

d) Phishing

b) Loan flipping

What is a cashier's check scam typically designed to do?

a) Steal customer identity

b) Cause overdrafts via fake checks

c) Launder money

d) Avoid taxes

b) Cause overdrafts via fake checks

How can gift card scams typically begin?

a) By offering bonus cards

b) Requesting gift cards as payment from an unexpected source

c) Physical mail offers

d) Card reader skimming

b) Requesting gift cards as payment from an unexpected source

What is a key warning sign of elder financial abuse?

a) Frequent bank visits

b) Depleting joint checking accounts

c) Asking about interest rates

d) Reading privacy notices

b) Depleting joint checking accounts

What is the role of the Sarbanes-Oxley Act (SOX)?

a) Regulate loan rates

b) Increase ATM fees

c) Improve corporate governance and financial transparency

d) Promote online banking

c) Improve corporate governance and financial transparency

Who is responsible for corporate governance in a bank?

a) The branch manager

b) The bank tellers

c) The board of directors and senior management

d) Marketing department

c) The board of directors and senior management

What must mortgage loan originators do under the SAFE Act?

a) Register with the Nationwide Mortgage Licensing System

b) Hold a CPA license

c) Get FDIC approval

d) Avoid working in private banks

a) Register with the Nationwide Mortgage Licensing System

Why are real-time payment systems risky?

a) They are rarely used

b) They require no encryption

c) They allow instant fund transfers which fraudsters exploit

d) They avoid bank oversight

c) They allow instant fund transfers which fraudsters exploit

What's the purpose of incident response programs in banks?

a) Process refunds

b) Handle disputes with merchants

c) React to data breaches and security incidents

d) Schedule maintenance

c) React to data breaches and security incidents

Which regulation limits when and how banks can share personal financial info with third parties?

a) Regulation Z

b) Regulation P

c) Regulation Q

d) Regulation Y

b) Regulation P

Which of the following is a short-term loan product for businesses?

a) Mortgage

b) Line of credit

c) Equipment loan

d) Long-term bond

b) Line of credit

What does an amortizing loan require?

a) Balloon payment

b) Lump sum at maturity

c) Regular payments that include principal and interest

d) Interest-only payments

c) Regular payments that include principal and interest

What is the key distinction of open-ended credit?

a) It has no due date

b) It can be borrowed against repeatedly up to a limit

c) It is only for home equity

d) It requires no credit check

b) It can be borrowed against repeatedly up to a limit

Which fraud technique involves fake documents to claim goods were shipped?

a) Pharming

b) Advance fee fraud

c) Letter of credit fraud

d) Spoofing

c) Letter of credit fraud

What is the definition of money laundering?

a) Opening fake accounts

b) Moving illegal money to make it appear legitimate

c) Fraudulent credit card use

d) Avoiding credit checks

b) Moving illegal money to make it appear legitimate

Why do banks monitor for "red flags"?

a) To ensure customer satisfaction

b) To promote online services

c) To detect signs of identity theft

d) To reduce paperwork

c) To detect signs of identity theft

Which of the following is true about matched funding?

a) It reduces operational risk

b) It pairs liabilities and assets with similar maturities

c) It guarantees profit

d) It ensures compliance

b) It pairs liabilities and assets with similar maturities

What type of account offers the ability to draw funds as needed, like a credit card?

a) Installment loan

b) Term loan

c) Line of credit

d) Lease

c) Line of credit

What is the role of the FDIC in banking?

a) Set loan rates

b) Provide insurance for depositors

c) Regulate mortgage brokers

d) Issue credit ratings

b) Provide insurance for depositors

Which fraud involves convincing a customer to help move money in exchange for a commission?

a) BEC

b) Advance fee fraud

c) Card skimming

d) Wire fraud

b) Advance fee fraud

How does spoofing differ from phishing?

a) It impersonates executives

b) It uses manipulated Caller ID to deceive

c) It sends fake texts

d) It involves gift cards

b) It uses manipulated Caller ID to deceive

What must banks do under the Bank Secrecy Act?

a) Offer fixed-rate loans

b) Monitor and report suspicious activity

c) Cap fees on accounts

d) Use paper records only

b) Monitor and report suspicious activity

What is one consequence of identity theft?

a) Better credit offers

b) Automatic loan approvals

c) Fraudulent account openings and financial loss

d) Lower interest rates

c) Fraudulent account openings and financial loss

What is a characteristic of fixed-rate mortgage loans?

a) Interest rate varies

b) Backed by credit cards

c) Stable interest payments over the life of the loan

d) Only available through SBA

c) Stable interest payments over the life of the loan

What are financial performance measures used for in banks?

a) Legal compliance

b) Budgeting and assessing goals

c) Selling loans

d) Writing policies

b) Budgeting and assessing goals

What does SOFR stand for in banking?

a) Secured Overnight Financing Rate

b) Standard Open Financial Rate

c) Structured Offering Fixed Return

d) Securities Operations Flow Regulation

a) Secured Overnight Financing Rate

Which interest rate is set by individual banks for their best customers?

a) Fed Funds Rate

b) SOFR

c) Prime Rate

d) Discount Rate

c) Prime Rate

What is the Fed Funds Rate?

a) The rate the Fed charges consumers

b) The rate banks charge each other for overnight loans

c) The rate for long-term treasury bonds

d) A fixed rate set annually

b) The rate banks charge each other for overnight loans

What defines a de novo bank?

a) A bank created through a merger

b) A newly chartered bank

c) An online-only bank

d) A foreign bank operating in the U.S.

b) A newly chartered bank

What is one reason banks engage in mergers and acquisitions?

a) To increase regulation

b) To shrink market presence

c) To gain market share or diversify

d) To close unprofitable branches

c) To gain market share or diversify

What is a bank holding company?

a) A company owned by a bank

b) A bank with foreign branches

c) A corporation that owns controlling interest in one or more banks

d) A federal regulator

c) A corporation that owns controlling interest in one or more banks

What is one purpose of bank investments?

a) Generate interest income

b) Pay dividends

c) Avoid taxes

d) Fund customer giveaways

a) Generate interest income

How do banks typically earn fee income?

a) By trading stocks

b) From interest on deposits

c) From service charges and commissions

d) Through mergers

c) From service charges and commissions

What are fixed assets on a bank's balance sheet?

a) Cash reserves

b) Checking accounts

c) Buildings and equipment

d) Short-term loans

c) Buildings and equipment

Which of the following would be considered an investment for income?

a) Loan to a customer

b) Treasury bond

c) ATM withdrawal

d) Checking account

b) Treasury bond

Which banking product is typically amortized?

a) Credit card

b) Mortgage loan

c) HELOC

d) Certificate of Deposit

b) Mortgage loan

Which account would NOT appear as a liability?

a) Savings deposit

b) Tax payable

c) Interest income

d) Dividends payable

c) Interest income

What is the primary goal of liquidity management?

a) Maximize long-term capital gains

b) Ensure enough cash to meet obligations

c) Reduce marketing costs

d) Expand branch networks

b) Ensure enough cash to meet obligations

What distinguishes trading account investments from other bank investments?

a) They are held for long-term returns

b) They are exempt from regulation

c) They are held for short-term profit

d) They are not reported to regulators

c) They are held for short-term profit

What is one advantage of being a full-service bank?

a) Avoiding federal regulations

b) Only focusing on loans

c) Cross-selling multiple products to the same customer

d) Limiting branch operations

c) Cross-selling multiple products to the same customer

Which type of loan is most sensitive to market interest rate changes?

a) Fixed-rate mortgage

b) Installment loan

c) Adjustable-rate mortgage (ARM)

d) Auto loan

c) Adjustable-rate mortgage (ARM)

What are bank dividends classified as?

a) Assets

b) Expenses

c) Liabilities

d) Capital gains

c) Liabilities

Which law limits deceptive and abusive financial marketing practices?

a) Bank Secrecy Act

b) SOX

c) Truth in Lending Act

d) Dodd-Frank Act

d) Dodd-Frank Act

What is the primary goal of customer identification programs (CIP)?

a) Sell products

b) Detect suspicious behavior

c) Verify identities and prevent financial crime

d) Increase deposits

c) Verify identities and prevent financial crime

What is included in the definition of identity theft?

a) Using a stolen debit card only

b) Applying for credit with someone else's information

c) Spamming email accounts

d) Depositing fake checks

b) Applying for credit with someone else's information

Which feature distinguishes a promissory note?

a) It's unsecured

b) It's only for home loans

c) It's a written promise to repay a loan

d) It earns interest automatically

c) It's a written promise to repay a loan

What typically backs a secured loan?

a) The borrower's job

b) Government insurance

c) Collateral

d) Credit score

c) Collateral

What makes a credit card a form of open-ended credit?

a) It has a fixed repayment plan

b) It allows repeat borrowing up to a limit

c) It requires collateral

d) It earns interest automatically

b) It allows repeat borrowing up to a limit

What is one role of internal bank auditors?

a) Set customer service policies

b) Detect internal fraud and ensure accuracy of financial records

c) Promote loan products

d) Reduce interest rates

b) Detect internal fraud and ensure accuracy of financial records

What is the primary purpose of bank regulators using financial reports?

a) To market products

b) To enforce labor laws

c) To evaluate financial soundness and compliance

d) To set interest rates

c) To evaluate financial soundness and compliance