Bank Deposit

### What is a bank deposit? - [x] A sum of money placed by a customer with a bank. - [ ] A loan provided by a bank to a customer. - [ ] A fee charged by a bank for account maintenance. - [ ] A government issued bond held by banks. > **Explanation:** A bank deposit is essentially a sum of money placed by a customer in a bank for safekeeping, earning interests in some cases. ### Which type of bank account typically does not earn interest? - [ ] Savings Account - [ ] Fixed Deposit Account - [x] Current Account - [ ] Money Market Account > **Explanation:** A current account is usually for day-to-day operations and does not earn interest. ### Are deposits in a bank always accessible anytime? - [ ] Yes, all types of bank deposits are instantly accessible. - [x] No, some bank deposits like fixed accounts can have restricted withdrawal terms. - [ ] Yes, but only for interest-earning deposits. - [ ] Yes, but a penalty applies for early withdrawal in savings accounts. > **Explanation:** Different types of deposits have different accessibility terms; fixed deposit accounts often restrict access until a specified maturity date. ### How do banks primarily generate income from deposits? - [ ] Through bank fees and service charges. - [x] By lending a portion of deposits as loans and earning interest. - [ ] Via stock market investments. - [ ] By charging penalty fees for early withdrawals. > **Explanation:** Banks primarily generate income by lending a portion of customer deposits to borrowers and earning interest from those loans. ### What role does the FDIC play with regards to bank deposits? - [ ] It sets the interest rates for all bank deposits. - [x] It insures deposits up to a certain limit. - [ ] It regulates the accessibility of deposits. - [ ] It manages all bank loan processes. > **Explanation:** The Federal Deposit Insurance Corporation (FDIC) insures deposits up to a certain limit to protect depositors in case of bank failures. ### What is Fractional Reserve Banking? - [ ] A banking system that invests all deposits in the market. - [x] A system where only a fraction of deposits are kept as reserves. - [ ] A full reserve banking system. - [ ] The method banks use to determine interest rates for deposits. > **Explanation:** Fractional Reserve Banking is a system where banks keep only a fraction of depositors' funds in reserve and lend out the remaining portion. ### How does a fixed/time deposit account differ from a savings account? - [x] Fixed deposits have a set term and limited withdrawal options. - [ ] Savings accounts have no interest, fixed deposits do. - [ ] Fixed deposits offer no interest. - [ ] Savings accounts cannot be used for loans. > **Explanation:** Fixed deposits have a specified term and higher interest rates but generally do not allow immediate withdrawal unlike savings accounts which can be accessed anytime. ### What benefit does a savings account primarily offer? - [ ] Higher interest than any other deposit type. - [x] Ability to earn interest while maintaining easy access to funds. - [ ] Access to exclusive bank services. - [ ] No minimum balance requirements. > **Explanation:** A savings account offers the benefit of earning interest while providing quick access to funds. ### How does the interest on a fixed deposit compare to a savings account? - [ ] Lower - [ ] Same - [x] Higher - [ ] Not applicable for both > **Explanation:** Fixed deposits typically offer higher interest rates than savings accounts due to the restricted access to the funds for a set period. ### Why might a business prefer a current account over a savings account? - [ ] For earning interest on short-term funds. - [ ] For long-term investment of business capital. - [x] For facilitating day-to-day operational transactions. - [ ] For higher interest rates. > **Explanation:** Businesses prefer current accounts for their ease in conducting everyday transactions and managing cash flow, even though these accounts typically do not earn interest.