Max Ellis Guide – Banking Questions and Answers | Latest Version | 2025/2026 | Correct & Verified

Max Ellis Guide – Banking Questions and Answers | Latest Version | 2025/2026 | Correct & Verified What is the main function of a bank? To accept deposits and provide loans What is a deposit? Money placed with a bank for safekeeping What is a withdrawal? Taking money out of a bank account What is interest? Money earned or paid for using funds What is simple interest? Interest calculated only on the principal What is compound interest? Interest calculated on principal plus previous interest What is a savings account used for? 2 Storing money while earning interest What is a current account mainly used for? Daily transactions and payments What is a fixed deposit? Money locked in the bank for a fixed period Why do banks pay interest on deposits? To encourage people to save Why do banks charge interest on loans? To earn income and cover risk What is a loan? Money borrowed that must be repaid What is collateral? An asset pledged to secure a loan What is credit? The ability to borrow money 3 What is a debit card? A card that uses money from your account What is a credit card? A card that allows borrowing up to a limit What does ATM stand for? Automated Teller Machine What is online banking? Banking services accessed through the internet What is mobile banking? Banking services accessed using a mobile device What is a bank statement? A record of account transactions What is overdraft? Permission to spend more than account balance 4 What is a cheque? A written order to a bank to pay money What is cheque clearing? Process of transferring funds between banks What is a standing order? Automatic fixed regular payment What is a direct debit? Automatic variable payment authorised by customer What is liquidity in banking? Ability to meet short-term obligations What is solvency? Ability to meet long-term obligations What is capital in banking? Funds owned by the bank What is risk in banking? 5 Possibility of financial loss What is credit risk? Risk that a borrower fails to repay What is interest rate risk? Risk from changes in interest rates