CBP Retail Banking Products 2 — Questions and Answers
Question 1: A customer wants a deposit account that earns interest but also allows unlimited check-writing. Which product best fits this need?
- Negotiable Order of Withdrawal (NOW) account (Correct answer)
- Standard savings account
- Money market deposit account
- Certificate of deposit
Correct answer: Negotiable Order of Withdrawal (NOW) account
A NOW account is an interest-bearing checking account that allows unlimited check-writing, unlike savings accounts which have transfer restrictions.
Question 2: Which of the following is a key characteristic of a jumbo certificate of deposit?
- It carries a minimum deposit of $100,000 and typically offers a higher interest rate (Correct answer)
- It is insured up to $500,000 by the FDIC
- It permits partial withdrawals without penalty
- It must mature within 30 days of issuance
Correct answer: It carries a minimum deposit of $100,000 and typically offers a higher interest rate
Jumbo CDs require a minimum deposit of $100,000 and usually offer higher yields in exchange for that larger commitment.
Question 3: A bank offers a mortgage where the interest rate is fixed for 5 years and then adjusts annually. This is best described as a:
- 5/1 adjustable-rate mortgage (ARM) (Correct answer)
- Balloon mortgage
- Interest-only mortgage
- Fixed-rate mortgage
Correct answer: 5/1 adjustable-rate mortgage (ARM)
A 5/1 ARM has a fixed rate for the first 5 years and then resets annually based on a benchmark index.
Question 4: Under Regulation D, how many convenient transfers or withdrawals per month is a savings account traditionally limited to?
- 6 (Correct answer)
- 3
- 12
- Unlimited
Correct answer: 6
Regulation D historically limited savings accounts to 6 convenient transfers per month, though the Fed suspended this limit in 2020.
Question 5: A retail bank customer uses their debit card to make a purchase that exceeds their checking account balance. The bank covers the shortfall and charges a fee. This service is called:
- Overdraft protection (Correct answer)
- Stop-payment order
- Float management
- Chargeback service
Correct answer: Overdraft protection
Overdraft protection allows transactions to clear even when the account has insufficient funds, in exchange for a fee or linked account transfer.
Question 6: Which retail lending product typically uses the borrower's home equity as collateral and provides a revolving line of credit?
- Home Equity Line of Credit (HELOC) (Correct answer)
- FHA loan
- Unsecured personal line of credit
- Auto loan
Correct answer: Home Equity Line of Credit (HELOC)
A HELOC is a revolving credit line secured by the borrower's home equity, allowing draws up to a set limit during the draw period.
Question 7: A bank's retail product that allows customers to automatically move excess funds from a checking account into an interest-bearing account each night is called a:
- Sweep account (Correct answer)
- Zero-balance account
- Linked savings account
- Money market mutual fund
Correct answer: Sweep account
A sweep account automatically transfers balances above a set threshold into a higher-yielding vehicle at end of business each day.
CBP Retail Banking Products 2
A customer wants a deposit account that earns interest but also allows unlimited check-writing.
Which product best fits this need?