A.3 Function, purpose, and general structure of financial institutions

Question 1

Financial institutions that offer full banking services to individuals and businesses.

Think of where you go to deposit your paycheck.

Answer 1

Commercial Banks

Question 2

Member-owned financial cooperatives that provide banking services, often at lower interest rates.

Similar to banks but owned by members

Answer 2

Credit Unions

Question 3

Institutions that assist individuals, corporations, and governments in raising financial capital through underwriting or acting as the client’s agent.

Focus on investment services rather than deposits

Answer 3

Investment Banks

Question 4

Firms that assist people in buying and selling securities and other financial assets.

Think of stock trading

Answer 4

Brokerages

Question 5

Organizations that provide risk management in the form of insurance contracts.

Consider what protects you financially from losses.

Answer 5

Insurance Companies

Question 6

Investment pools that pay for employees’ retirements.

Retirement savings collected by your employer.

Answer 6

Pension Funds

Question 7

Investment vehicles made up of a pool of funds collected from many investors for the purpose of investing in securities.

Collective investments managed by professionals.

Answer 7

Mutual Funds

Question 8

Private investment partnerships open to a limited range of investors.

Less regulated than mutual funds, often aim for higher returns.

Answer 8

Hedge Funds

Question 9

Institutions that manage a state’s currency, money supply, and interest rates.

The Federal Reserve in the U.S. is an example.

Answer 9

Central Banks

Question 10

Specialize in accepting savings deposits and making mortgage and other loans.

Specialize in accepting savings deposits & making loans.

Answer 10

Savings and Loan Associations