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Chapter 13: Banking Review Questions Profile – Read Profile on TD Canada Trust on page 395 in your textbook and answer the following questions. 1. Why would it be bad to create megabanks? List the positive and negative aspects of creating one giant bank in Canada. 2. What were some of the benefits of the TD Canada Trust merger? A. Read the first section, The Need for Financial Institutions (pages 396-402), in your textbook, and answer the following questions. 1. Describe three ways banks earn profits. 2. What is the Bank Act? 3. Briefly define the characteristics of the three classes of Canadian banks, and provide two examples of each. 4. List the five advantages of branch banking. 5. List three ways that branch banking is changing. 6. What is the function of the Bank of Canada? 7. What are the consequences of rising and falling interest rates? B. Do Activity: Bank Profits The chart below show the net profits for each of the Big Five banks in Canada in 2005 and 2006 in millions of dollars. Create a graph using Excel or chart wizard and answer the following questions. Big Five Bank Earnings 2006-2006 (in millions of dollars) 2005 2006 BMO 2400 2663 CIBC (32) 2646 RBC 3387 4728 Scotiabank 3209 3579 TD 2229 4603 1. Rank the banks from most profitable to least profitable in 2005 and 2006. 2005 2006 2. Which bank’s earnings had the greatest dollar increase from 2005 to 2006? 3. Banks earn revenue through service fees, interest on loans, and investments. What are two factors that may cause a bank to not turn a profit? Chapter 13: Banking Review Questions C. Read the second section, Other Financial Institutions (pages 402-405), in your textbook, and answer the following questions. 1. Describe the three other financial institutions available in Canada. a. Trust companies b. Caisses populaires and credit unions c. Insurance companies D. Read the third section, About Accounts (pages 405-409), in your textbook, and answer the following questions. 1. How is a joint account different from a single-person account? 2. When opening an account, what kind of information may a financial institution ask you to provide? 3. List the five pieces of acceptable identification for opening a new bank account. What features must this identification contain? 4. What is a signature card? Why is it necessary? 5. What is an account statement? 6. What is an automated banking machine (ABM) used for? What is required in order to use an ABM? E. Read the Fifth section, Writing Cheques (pages 412-417), in your textbook, and answer the following questions. 1. Briefly describe the six cheque essentials. a. Account number b. Amount c. Date d. Drawer e. Payee f. Drawee 2. What security features exist on cheques? 3. Why would you need to stop payment on a cheque? What details must you provide for the payment to be stopped? 4. Explain the process of cheque clearing. 5. What is magnetic ink character recognition (MICR)? What is it used for? 6. What does it mean to have a hold on a cheque? Why would a bank put a hold on a cheque? F. Read the sixth section, Shared ABM Networks (pages 417-421), in your textbook, and answer the following questions. 1. What is the electronic fund transfer system (EFTS)? What are its benefits to customers and financial institutions? Name three main ABM networks. 2. Briefly describe Interac Direct Payment, telephone banking, and online banking. 3. How do virtual banks work? Provide three examples of online banks. Chapter 13: Banking Review Questions G. Read the seventh section, Other Financial Services (pages 421-426), in your textbook, and describe the following services offered by financial institutions. a. Loans b. Lines of credit c. Credit cards d. Direct deposits e. Money orders and drafts f. Night depositories g. Overdraft protection h. Preauthorized bill payments i. Safety deposit boxes j. Combination service packages H. Read the eighth section, Shopping for Financial Institutions (pages 396-402), in your textbook, and answer the following questions. 1. When shopping for a financial institution, what should you look for? 2. Where can you find information about bank services? 3. Explain why it is unlikely that Canada will ever be a cashless society. 4. What are smart cards?
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