Question 1

Federally registered banks are regulated by which of the following?

Accepted Answer

Federally registered banks in Canada are regulated by the Office of the Superintendent of Financial Institutions (OSFI), which is an independent agency of the federal government. The Canada Revenue Agency (A) is responsible for administering tax laws, the Finance Department of Canada (C) handles fiscal policy, and there is no such position as the Federal Commissioner of Banks (D) in Canada.

Question 2

Imagine you have worked every summer for the last four years in order to save money to buy a car. You have $23,000 deposited in a savings account at Scotiabank. One day, you turn on the news and discover that the stock market is crashing and people are rushing to banks to withdraw all of their money. What should you do?

Accepted Answer

As a client of Scotiabank, you are protected by the Canada Deposit Insurance Corporation (CDIC), which insures eligible deposits up to a maximum of $100,000 in case of a bank failure. Therefore, there is no need to panic and withdraw your money. You can rest assured that your $23,000 will be safe and, in the worst-case scenario, you will receive a cheque for that amount.

Question 3

Georgina has $200,000 in a savings account in her name alone and another $150,000 in an investment account held jointly with her daughter. If the bank fails, how much of her deposits are protected by the CDIC?

Accepted Answer

The answer of Georgina has $200,000 in a savings account...

Question 4

Tameka owns a small business and has two accounts at the local bank, which is CDIC insured. Her personal savings account has $125,000, and an account for her investments has $285,000. If the local bank fails, how much will Tameka receive from the FDIC?

Accepted Answer

The answer of Tameka owns a small business and has...

Question 5

Meridian offers chequing and deposit and loan products to its members. Meridian is which type of financial institution?

Accepted Answer

Meridian is a credit union, which is a type of financial institution that operates as a member-owned cooperative. Credit unions offer similar products and services as traditional banks, but with a focus on serving the needs of their members rather than making a profit for shareholders.

Question 6

Which of the following financial institutions would be considered a non-bank financial institution?

Accepted Answer

The answer of Which of the following financial institutions would...

Question 7

You are living off campus in an apartment near school. It is the first of the month and your rent is due. You won't have enough money in your account to cover until your employer deposits your paycheque. You don't want to overdraw your account, so you check your balance several times before sending your rent to the landlord. This example illustrates which innovation in banking?

Accepted Answer

The scenario described shows the use of real-time monitoring of funds, where the individual is checking their account balance multiple times before making a payment to ensure that they do not overdraft.

Question 8

Kyle uses a local financial institution for his banking needs such as a chequing and savings account. When he asks the manager what the money he has deposited is used for, the manager explains that the institution deals primarily with consumer loans and home mortgage loans. Anyone can open an account at this institution. What type of financial institution is Kyle using?

Accepted Answer

The description given in the scenario matches that of a chartered bank, which deals with consumer and home mortgage loans and is open for anyone to have an account with.

Question 9

Suzanne is considered a member of her financial institution, which provides chequing, savings, and other financial services. She is eligible for membership because she is a teacher. What type of financial institution is Suzanne using?

Accepted Answer

Suzanne is using a credit union, which is a type of financial institution that is member-owned and provides financial services to its members at lower costs than traditional banks. Credit unions typically have membership requirements based on factors like occupation or location. In this case, Suzanne's membership eligibility based on being a teacher suggests that she is part of a credit union for educators.

Question 10

You are so thankful that your employer offers direct deposit for your paycheques. Every other Friday, your paycheque is deposited into your account, and it saves you from having to make a trip to the bank. This is an example of which innovation in banking?

Accepted Answer

Direct deposit is a form of convenient deposit option, where the paycheck is automatically deposited into the bank account without requiring a physical visit to the bank. The other options listed do not apply to this scenario.

Question 11

Lana's business has two accounts at a bank: $150,000 in an investment account and $300,000 in a savings account. If the bank fails, how much of the business's deposits are protected by the CDIC?

Accepted Answer

The CDIC (Canada Deposit Insurance Corporation) protects eligible deposits up to a maximum of $100,000 per member. Therefore, only the $300,000 in the savings account is protected, while the $150,000 in the investment account is not eligible for protection. Therefore, the total amount protected would be $300,000.

Question 12

Which of the following is protected by Canadian Deposit Insurance Corporation?

Accepted Answer

The Canadian Deposit Insurance Corporation protects bank deposits in case of insolvency or bankruptcy of the financial institution holding the deposit. Mutual funds, bonds, and common shares are not protected by CDIC.

Question 13

It is Saturday night at 11:00 p.m., and you and your friends are going to see a midnight showing of the latest action-hero movie. You log on to your bank's website on your laptop to check your balance to make sure you have enough money in your account to buy a movie ticket. This example illustrates which innovation in banking?

Accepted Answer

The example given illustrates the innovation of real-time monitoring of funds, as the individual logs onto their bank's website to check their balance before making a purchase.

Question 14

You receive a birthday cheque from your grandmother in the mail. It is raining and you really do not feel like leaving your dorm to go to the bank to deposit your cheque. You remember that your bank allows you to take a picture of the front and back of a cheque in order to deposit it into your account-all from your mobile phone. This example illustrates which innovation in banking?

Accepted Answer

The innovation in banking being illustrated in this scenario is convenient deposit options, where the bank allows the customer to deposit cheques through their mobile phone by taking a picture of the front and back of the cheque.

Question 15

The CDIC provides basic deposit insurance of what amount per depositor?

Accepted Answer

The Canada Deposit Insurance Corporation (CDIC) provides basic deposit insurance of up to $100,000 per depositor, per insured category, at each member institution.

Question 16

Why does Laura keep only $100,000 combined in her savings and chequing accounts at TD Bank?

Accepted Answer

The maximum amount insured per depositor by the Canada Deposit Insurance Corporation (CDIC) is $100,000. Therefore, Laura keeps only $100,000 combined in her savings and chequing accounts at TD Bank to ensure that her deposits are fully insured in case of any bank failure or insolvency.

Question 17

Canaccord Genuity is a brokerage and banking company that operates in four main divisions: trading, wealth management, investing, and banking. Canaccord Genuity can be categorized as which of the following?

Accepted Answer

Canaccord Genuity operates in multiple financial service areas, but it is not a commercial bank, credit union or mutual fund bank. Therefore, the best choice is C, a non-bank financial institution.

Question 18

Jeff and Nathan are going to a concert and Jeff forgot his wallet back at home. Nathan has extra cash and lends Jeff $100. Jeff has his phone with him and Interac e-transfers the $100 to Nathan. This example illustrates which innovation in banking?

Accepted Answer

This example illustrates increased access to funds, as Jeff is able to transfer money to Nathan instantly without needing physical cash or to be at a bank, showcasing the convenience and accessibility of modern digital banking methods.

Question 19

The responsibility for insuring deposits against bank failures is held by which of the following?

Accepted Answer

The Canada Deposit Insurance Corporation (CDIC) is responsible for insuring deposits against bank failures in Canada. The CDIC is a federal Crown corporation that was established in 1967 to provide deposit insurance and contribute to the stability of Canada's financial system.

Question 20

You turn on the news to discover that CIBC has failed. Your parents have their life savings of $220,000 in an account at CIBC. Just then, the phone rings. Your mom is in a panic. What should you tell her?

Accepted Answer

The best choice would be to assure your mom that because the bank is CDIC insured, they will be able to recover $100,000 of their savings. CDIC is a government agency that provides insurance protection to Canadians who deposit money into banks in case the bank fails. Since your parents' life savings are below $100,000, they will be fully covered and will not lose any of their money. It is important to note that the remaining amount above $100,000 may not be insured by CDIC and they may need to wait until the bank's assets are sold to recover that money. Therefore, advising them to withdraw all of their money immediately may not be the best approach.

Quiz 18: Understanding Money Banking and Credit