Understanding Banking and Finance

In what way do banks drive the United States economy?

• They provide loans that allow families and businesses to invest for the future.

• Their success or failure affects the availability of money.

• They set interest rates and payment policies.

• They determine who can invest in businesses.

How do commercial banks typically generate the most profit?

• by buying and selling commodities on domestic and international stock markets

• by loaning depositors' money to borrowers and charging the borrowers interest

• by charging lenders and depositors interest on the money they borrow and deposit

• by buying and selling real estate and investing the profits in competitor institutions

Which of the following financial institution offer services that may apear useful to many, but dut due to high interest rates and other practices, may lerad to financial loss and hardship.

• Banks

• Credit Unions

• Savings and Loans

• Payday lenders

• Title Loans

Blue Financial is a financial institution owned by its members. It offers lower loan rates and easier application processes for its members. Based SOLELY on this information, Blue Financial is MOST LIKELY a

• Credit Union

• Commercial Bank

• Savings and Loan

• Peer to Peer Payment Center

Which company will give out small loans in return for a portion of the upcoming paycheck

• Ttitle Pawn

• Payday Lender

• Credit Union

• Bank

In which of the following ways does a depositor earn money by using a savings account?

• The bank holding the account pays interest on the amount in the account.

• The bank holding the account pays dividends to those invested in an account.

• The depositor sets up direct deposit into the account with his or her employer.

• The depositor sets up direct debit with the bank that is his or her loan holder.

Why are banks willing to pay people for keeping money in savings accounts?

• because it forces depositors to assume all of the financial risks

• because banks can invest that money and create profits for the bank

• because banks are rewarded by the federal government for having the greatest number of depositors

• because banks are able to inspect the money for counterfeits and maintain the value of real money

Reuben opened a savings account with a bank and deposited $5,000. Maisie opened a savings account with a credit union and deposited $5,000. If neither Reuben nor Maisie deposit or withdraw money from their accounts, and neither is charged any fees, who will MOST LIKELY have more money in their savings account after five years have passed?

• Reuben, because banks usually offer higher interest rates on savings accounts than credit unions

• Maisie, because credit unions usually offer higher interest rates on savings accounts than banks

• Reuben, because banks are non-profit institutions and deposits are exempt from taxes

• Maisie, because credit unions are non-profit institutions and deposits are exempt from taxes