The Functions of Modern Banks

The video tutorial explains the role of banks in storing and growing money, offering various account types, and providing loans. It covers savings, checking, money market accounts, and CDs, highlighting their interest rates and risks. The importance of loans for businesses and consumers is discussed, along with the role of credit scores in loan approval. The tutorial concludes with a summary of banks' contributions to the economy and a preview of future investment topics.

What is the primary reason people historically started bank accounts?

• To get free financial advice

• To avoid paying taxes

• To receive interest on their deposits

• To hide money from others

Which type of bank account typically offers the lowest risk but also the lowest interest?

• Money market accounts

• Savings accounts

• Certificates of deposit

• Investment accounts

What is a key feature of a certificate of deposit (CD)?

• Fixed interest rate

• Unlimited withdrawals

• High risk

• No interest earned

How do banks primarily earn profit from loans?

• By charging service fees

• Through interest rate differences

• By selling customer data

• Through government subsidies

Why is a credit score important when applying for a loan?

• It sets the loan interest rate

• It guarantees loan approval

• It determines the loan amount

• It predicts the likelihood of timely repayment

What is a mortgage primarily used for?

• Buying a car

• Paying for education

• Purchasing real estate

• Starting a business

What is typically required from a borrower when taking out a mortgage?

• A business plan

• A down payment

• A co-signer

• A full cash payment