Chapter 13 Flashcards
How are banks similar to businesses?
Just like any other business, the goal of a bank is to earn a profit for its owners. For most banks, the owners are their shareholders. Banks do this by charging more interest on the loans and other debt they issue to borrowers than they pay to people who use their savings vehicles.
What is the difference between a Schedule I, II and III bank?
- The bank’s ownership determines its class:
– Schedule I (Canadian owned/controlled)
– Schedule II (foreign owned)online
– Schedule III (foreign banks allowed to operate in Canada) mixed ownership,no physical branches
What is the prime lending rate?
What Is the Prime Rate? The term prime rate refers to the interest rate that commercial banks charge their most creditworthy customers. The Federal Reserve (Fed) sets the federal funds overnight rate which serves as the basis for the prime rate, which is the starting point for other interest rates.
How does insurance work?
*Insurance works by sharing risk.
*Payments are used from many policyholders to pay out the claims of a few.
*Insurance companies pool together premiums paid by policyholders.
*An insurance company’s pool of premiums can severally drain when major disasters happen.
