Banking test

What is the purpose of a savings account?

• To earn interest on deposits.
• To make everyday transactions.
• To borrow money.
• To invest in stocks.

What does the term "overdraft" refer to?

• Earning extra interest on a deposit.
• Withdrawing money from a savings account.
• Spending more money than is available in a checking account.
• Transferring funds between accounts.

What is the role of the Federal Reserve in the banking system?

• Regulating interest rates.
• Issuing banknotes.
• Providing insurance for deposits.
• Controlling inflation.

What is the main difference between simple interest and compound interest?

• Simple interest is earned on the initial deposit only, while compound interest is earned on both the initial deposit and the accumulated interest.
• Simple interest is calculated more frequently than compound interest.
• Compound interest is paid out monthly, while simple interest is paid annually.
• Simple interest is only applicable to loans, while compound interest is applicable to savings.

If you deposit $1,000 in a savings account with an annual interest rate of 5%, how much interest would you earn after one year, assuming simple interest?

• $50
• $25
• $75
• $100

What is a Certificate of Deposit (CD)?

• A type of savings account.
• A government-issued financial document.
• A low-risk investment with a fixed term and interest rate.
• A credit card.

What is the purpose of writing a check?

• To transfer money between bank accounts.
• To earn interest.
• To make a one-time payment to a specific payee.
• To withdraw cash from an ATM.

What is a necessary component of a check?

• Account holder's phone number.
• Email address.
• Social security number.
• Signature.

In a check, where is who the amount is written too?

• Memo line.
• Payee line.
• Date line.
• Signature line.

If you receive a $500 paycheck, what would be the most responsible way to allocate the funds?

• Spend it all on personal desires.
• Save a portion in a savings account and spend the rest.
• Deposit the entire amount in a checking account.
• Invest the entire amount in stocks.