#1
Which of the following is not a type of financial institution?
Retail Store
ExplanationNot a financial institution; typically sells goods and services.
#2
What is the primary function of an investment bank?
Facilitating mergers and acquisitions
ExplanationFacilitates corporate transactions and provides financial advisory services.
#3
Which financial service typically involves borrowing money to purchase a home?
Mortgage loan
ExplanationLoan secured by real estate, primarily for home purchases.
#4
What is the main function of an insurance company?
Providing protection against financial losses
ExplanationTransfers risk from policyholders to the insurer in exchange for premiums.
#5
Which financial service typically involves pooling funds from multiple investors to invest in a diversified portfolio of securities?
Mutual fund
ExplanationCollective investment vehicle managed by professionals.
#6
Which of the following is NOT a type of insurance commonly offered by insurance companies?
Credit card insurance
ExplanationUncommon insurance type; typically offered by credit card issuers.
#7
Which financial service typically offers the highest interest rates to depositors?
Certificate of deposit (CD)
ExplanationOffers higher interest rates in exchange for locking funds for a specific period.
#8
What is the primary purpose of a credit union?
Providing financial services to members
ExplanationMember-owned cooperative providing various financial services.
#9
What is the primary role of the World Bank?
Providing loans to developing countries
ExplanationOffers financial and technical assistance to developing nations.
#10
Which financial institution acts as an intermediary between buyers and sellers in financial markets?
Stock exchange
ExplanationFacilitates trading of securities between investors.
#11
Which of the following is not a characteristic of a money market instrument?
Long maturity period
ExplanationMoney market instruments have short maturities, typically less than one year.
#12
What is the primary function of a stock exchange?
Facilitating the buying and selling of stocks and other securities
ExplanationProvides a platform for trading securities in a regulated environment.
#13
Which regulatory body oversees the activities of banks in the United States?
Federal Reserve System (Fed)
ExplanationCentral banking system responsible for monetary policy and bank supervision.
#14
What is the primary purpose of a hedge fund?
Investing pooled funds in various assets
ExplanationInvestment vehicle pursuing high returns through various strategies.
#15
What is the main function of the International Monetary Fund (IMF)?
Stabilizing exchange rates and facilitating international monetary cooperation
ExplanationPromotes global monetary cooperation and exchange rate stability.
#16
Which financial institution acts as the lender of last resort to commercial banks?
Central bank
ExplanationProvides liquidity support and financial stability.
#17
Which financial service typically involves investing in a diversified portfolio of stocks and bonds based on a predetermined investment objective?
401(k) plan
ExplanationEmployer-sponsored retirement plan offering tax benefits.
#18
What is the primary function of a financial planner?
Providing personalized financial advice and creating financial plans
ExplanationHelps individuals manage their finances and achieve goals.