2F2C: Introduction to the Banking System

What is the main function of a financial institution?

• Selling insurance policies

• Managing and providing financial services

• Only lending money to businesses

• Printing physical currency

Which of the following is NOT a key function of financial institutions?

• Offering interest-earning accounts

• Providing secure storage for money

• Managing stock market investments

• Issuing loans

What is an advantage of using a credit union instead of a commercial bank?

• Credit unions offer nationwide services

• Credit unions are for-profit institutions

• Credit unions typically offer lower fees and better interest rates

• Credit unions charge higher fees for savings accounts

Why might someone choose an online bank over a traditional bank?

• Online banks offer fewer fees and higher interest rates

• Online banks have physical branches nationwide

• Online banks require a higher minimum balance

• Online banks provide in-person customer service

What is liquidity in terms of banking?

• The interest rate charged on a loan

• The ability to access cash quickly without loss in value

• The increase in prices over time

• The total amount of money in a savings account

Which type of account is designed for frequent transactions like bill payments and purchases?

• Checking account

• Savings account

• Certificate of deposit (CD)

• Money market account

Why do savings accounts typically have higher interest rates than checking accounts?

• They require a higher minimum balance

• They limit the number of withdrawals per month

• They allow unlimited transactions

• They have a higher risk of fraud

What is the purpose of an overdraft fee?

• To reward customers for maintaining a high balance

• To charge customers who withdraw cash from an ATM

• To penalize customers for spending more money than they have in their account

• To charge customers for transferring money between accounts

How can someone avoid monthly maintenance fees on their bank account?

• Only using ATMs outside of their bank’s network

• Maintaining a minimum balance or setting up direct deposit

• Writing multiple checks each month

• Opening an account with no deposit

What factor is NOT important when selecting a financial institution?

• Interest rates on savings accounts

• Availability of customer service

• The color of the bank's logo

• Fees for account services