Chapter 5 - Chapter 5 Chapter Objectives Describe the...

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Chapter 5 Chapter Objectives Describe the functions of financial institutions Identify the components of interest rates Clarify the relationship between the maturity and interest rate of an investment Types of Financial Institutions Depository institutions: Financial institutions that accept deposits from individuals and provide loans Commercial banks : financial institutions that accept deposits and use the funds to provide commercial and personal loans Deposits insured by Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor Savings institutions (or thrift institutions): financial institutions that accept deposits and provide mortgage and personal loans to individuals Credit unions : nonprofit depository institutions that serve members who have a common affiliation Focus on Ethics: Special Rates on Deposits Check the fine print before making any deposit Ask important questions How long is an advertised rate good for? What will it be lowered to? How long must your maintain the deposit? Nondepository institutions : financial institutions that do not offer federally insured deposit accounts, but provide various other financial services Finance companies
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