PRINCIPLES OF BANKING ACTUAL FINALS ANSWERS
AND QUESTIONS SET A+
✔✔What is a money market deposit account? - ✔✔These accounts pay a higher
interest rate than savings accounts because the rate of interest is tied to current money
market rates. They also have a higher minimum monthly balance requirement and
monthly transfers are limited to six
✔✔What is a certificate of deposit? - ✔✔A time deposit with a foxed maturity date and a
fixed interest rate tied to the maturity and purchase amount
✔✔What is a Section 529 College Savings Plan? - ✔✔This account is only allowed to
be used for higher education expenses. Also, contributions are not tax-deductible
✔✔What is a Coverdell Education Savings Account? - ✔✔This account is to be used for
K-12 school expenses and higher education expenses. Contributions are not tax-
deductible
✔✔What is a concentration account? - ✔✔This is designed for businesses and is a
central account for all deposits that aren't invested.
✔✔What is a disbursement account? - ✔✔This is also designed for businesses and is
usually a zero-balance account funded by a concentration account when payments
must be made
✔✔What is an automated clearing house? - ✔✔This is a clearing facility operated for
the convenience of banks in a particular region, generally through the regional Fed
Bank. An ACH electronically processes interbank credits and debits.
✔✔What is power of attorney? - ✔✔A legal document that authorizes a person named
as an agent (attorney-in-fact) to act on behalf of another person (the principal)
✔✔What is the principal? - ✔✔The person or company that appoints another (an agent)
to act on his or her behalf
, ✔✔What is the right of survivorship? - ✔✔The right of surviving tenants to take full
possession of specific assets, such as account funds, upon the death of other tenants,
without establishing an estate but subject to state laws
✔✔What is a fiduciary? - ✔✔An individual, bank, or other party to whom specific
property is turned over under the terms of a contract and who acts for the benefit of
another party on a basis of trust and confidence
✔✔What is a beneficiary? - ✔✔The party legally entitled to receive the proceeds of an
annuity, insurance policy, letter of credit, trust fund, retirement account, or will, either
from an appointment, assignment, disposition, instrument, or contract
✔✔What is a partnership agreement? - ✔✔A legal agreement stating the contributions
each partner has made to the business, the nature of the business, and the proportions
in which each partner will share in profits or losses
✔✔What is a partnership resolution? - ✔✔A document containing language certifying
that the name of the partnership is exactly the same as the one provided to the bank
and listing who is authorized to write checks and sign for loans on behalf of the
partnership
✔✔What is a corporate resolution? - ✔✔A document filed with a bank that defines the
authority given to the corporation's officers and specifies who may sign checks, borrow
on behalf of the corporation, and otherwise conduct business and issue instructions to
the bank
✔✔What is Regulation E? - ✔✔This is the Electronic Fund Transfer Act. This
establishes the rights, liabilities, and responsibilities of parties to EFT. Also requires
disclosures related to EFTs, including recurring credits to deposit accounts. Lastly, it
outlines the consumer's and bank's responsibilities respectively for reporting and
resolving disputed or erroneous EFTs and for servicing payroll cards
✔✔What is Reg CC? - ✔✔This is the Expedited Funds Availability Act. Banks must alert
customers to their funds availability policies and the policies must be displayed where
customers making deposits can see them.
✔✔What is Reg DD? - ✔✔This is the Truth in Savings Act. This requires banks to give
customers the information they need to compare deposit account features. This only
applies to consumers opening deposit accounts, not to businesses
✔✔What is the Daily Balance Method? - ✔✔This is the application of a daily periodic
rate to the full amount of principal in the account each day.
AND QUESTIONS SET A+
✔✔What is a money market deposit account? - ✔✔These accounts pay a higher
interest rate than savings accounts because the rate of interest is tied to current money
market rates. They also have a higher minimum monthly balance requirement and
monthly transfers are limited to six
✔✔What is a certificate of deposit? - ✔✔A time deposit with a foxed maturity date and a
fixed interest rate tied to the maturity and purchase amount
✔✔What is a Section 529 College Savings Plan? - ✔✔This account is only allowed to
be used for higher education expenses. Also, contributions are not tax-deductible
✔✔What is a Coverdell Education Savings Account? - ✔✔This account is to be used for
K-12 school expenses and higher education expenses. Contributions are not tax-
deductible
✔✔What is a concentration account? - ✔✔This is designed for businesses and is a
central account for all deposits that aren't invested.
✔✔What is a disbursement account? - ✔✔This is also designed for businesses and is
usually a zero-balance account funded by a concentration account when payments
must be made
✔✔What is an automated clearing house? - ✔✔This is a clearing facility operated for
the convenience of banks in a particular region, generally through the regional Fed
Bank. An ACH electronically processes interbank credits and debits.
✔✔What is power of attorney? - ✔✔A legal document that authorizes a person named
as an agent (attorney-in-fact) to act on behalf of another person (the principal)
✔✔What is the principal? - ✔✔The person or company that appoints another (an agent)
to act on his or her behalf
, ✔✔What is the right of survivorship? - ✔✔The right of surviving tenants to take full
possession of specific assets, such as account funds, upon the death of other tenants,
without establishing an estate but subject to state laws
✔✔What is a fiduciary? - ✔✔An individual, bank, or other party to whom specific
property is turned over under the terms of a contract and who acts for the benefit of
another party on a basis of trust and confidence
✔✔What is a beneficiary? - ✔✔The party legally entitled to receive the proceeds of an
annuity, insurance policy, letter of credit, trust fund, retirement account, or will, either
from an appointment, assignment, disposition, instrument, or contract
✔✔What is a partnership agreement? - ✔✔A legal agreement stating the contributions
each partner has made to the business, the nature of the business, and the proportions
in which each partner will share in profits or losses
✔✔What is a partnership resolution? - ✔✔A document containing language certifying
that the name of the partnership is exactly the same as the one provided to the bank
and listing who is authorized to write checks and sign for loans on behalf of the
partnership
✔✔What is a corporate resolution? - ✔✔A document filed with a bank that defines the
authority given to the corporation's officers and specifies who may sign checks, borrow
on behalf of the corporation, and otherwise conduct business and issue instructions to
the bank
✔✔What is Regulation E? - ✔✔This is the Electronic Fund Transfer Act. This
establishes the rights, liabilities, and responsibilities of parties to EFT. Also requires
disclosures related to EFTs, including recurring credits to deposit accounts. Lastly, it
outlines the consumer's and bank's responsibilities respectively for reporting and
resolving disputed or erroneous EFTs and for servicing payroll cards
✔✔What is Reg CC? - ✔✔This is the Expedited Funds Availability Act. Banks must alert
customers to their funds availability policies and the policies must be displayed where
customers making deposits can see them.
✔✔What is Reg DD? - ✔✔This is the Truth in Savings Act. This requires banks to give
customers the information they need to compare deposit account features. This only
applies to consumers opening deposit accounts, not to businesses
✔✔What is the Daily Balance Method? - ✔✔This is the application of a daily periodic
rate to the full amount of principal in the account each day.
