Question

mariam wants to buy her first home but is worried about the high interest rates at commercial banks. amira clarifies that there is a type of financial institution that helps people become homeowners by providing savings accounts and affordable mortgage loans.

a(n) _________ is a financial institution primarily offering savings accounts and low-cost home loans to encourage homeownership.

a.) credit union
b.) commercial bank
c.) savings and loan bank
d.) investment bank

Explanation:

Analyze the question prompt

The prompt describes a financial institution that primarily offers savings accounts and low-cost home loans to encourage homeownership.

Evaluate the options

• credit union: A member-owned financial cooperative, democratically controlled by its members, providing credit and other financial services. While they offer mortgages, encouraging homeownership is not their sole primary defining purpose.
• commercial bank: A financial institution that accepts deposits, offers checking account services, makes various business, personal, and mortgage loans, and caters to both individuals and businesses.
• savings and loan bank: Also known as a savings and loan association (S&L) or thrift, this institution specializes in accepting savings deposits and making mortgage and other real estate loans to encourage homeownership.
• investment bank: A financial intermediary that performs a variety of services, such as underwriting debt and equity offerings, acting as an intermediary between securities issuers and the investing public, and facilitating mergers.

Connect to financial institutions

Using the Financial Markets knowledge point, we classify financial intermediaries by their primary functions. An institution specifically structured to pool savings to provide affordable residential mortgages is a savings and loan bank.

Answer:

• a.) credit union
• b.) commercial bank
• c.) savings and loan bank (Correct answer)
• d.) investment bank