Banking and Finance Quiz

Maria deposits $5,000 in a savings account earning 2% annual interest. The bank uses that money to lend out at 6%. How does this process benefit the economy?

• Maria loses money while the bank profits.

• The bank charges Maria a fee to cover the loan.

• Maria can borrow back her own money anytime.

• The bank’s lending helps someone buy a home or start a business.

A local farmer needs a $20,000 loan to buy new equipment. Which institution is most likely to offer him fair terms and reinvest in the local community?

• Payday lender

• Large international investment bank

• Hedge fund

• Local credit union

A startup raises $500,000 through Kickstarter. What is a key benefit of crowdfunding over a traditional bank loan?

• They avoid sharing profits with investors.

• Investors automatically become company owners.

• If the project fails, each backer only loses a small amount.

• Banks will forgive any future debt.

John has $10,000 to invest but doesn’t want his financial advisor motivated by sales commissions. What’s his best option?

• A credit card company earning on interest charges

• A payday lender offering fast cash

• A bank that gives commission bonuses to salespeople

• An investment bank that charges a flat yearly fee

A bank offers 0.5% interest on savings but loans money at 5%. What is the biggest risk the bank faces?

• Depositors might sue the bank for low rates

• The bank forgets to charge interest

• Interest rates could rise, hurting profits

• Borrowers might default and not repay loans

Which situation MOST closely caused the 2008 financial crisis?

• Banks refused to give out any loans at all

• Banks ran out of paper money and closed

• Banks increased interest rates on savings accounts

• Banks gave loans to many people who couldn’t repay them

A country struggles with ten local currencies. How could banks help solve this problem?

• Banks create one world currency

• Banks tax traders to prevent competition

• Banks trade currency and convert values fairly

• Banks stop all trade until one currency is used

Lisa chooses a credit union because she likes their member-focused approach. What is a benefit she might receive?

• Free government bailouts when needed

• Guaranteed high profits on risky investments

• No loan repayment required if she changes her mind

• A vote on major decisions of the credit union

After the 2008 crash, governments required banks to keep emergency funds. Why?

• To pay bank executives bonuses

• To ensure banks could absorb future losses

• To make sure banks gamble more for profits

• To reduce the number of credit unions

A small business owner needs a loan but is worried about high-interest rates and hidden fees. Which option focuses on shared values and community investment?

• Payday loan

• Stock market speculation

• Using a credit card

• Credit union loan