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

Question 1

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

Answer 1

Commercial Banks

Question 2

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

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.

Answer 3

Investment Banks

Question 4

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

Answer 4

Brokerages

Question 5

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

Answer 5

Insurance Companies

Question 6

Investment pools that pay for employees’ retirements.

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.

Answer 7

Mutual Funds

Question 8

A pooled investment vehicle that uses a range of strategies—including leverage, derivatives, and short selling—to seek high returns for accredited investors.

Answer 8

Hedge Funds

Question 9

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

Answer 9

Central Banks

Question 10

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

Answer 10

Savings and Loan Associations