Which of the following is a deposit-taking financial institution?

Which of the following is a deposit-taking financial institution?

• A. Commercial Banks
• B. Finance Companies
• C. Mutual Funds
• D. Venture Capitals

Answer: (A)

The key idea here is the distinction between institutions that accept deposits from the public and those that don’t. A commercial bank is defined by taking deposits (like checking and savings accounts) and then making loans with those funds, which is why banks are classically thought of as deposit-taking financial institutions. The other options don’t take deposits: finance companies raise funds from borrowings or capital markets to make loans but don’t offer traditional deposit accounts; mutual funds pool investor money to buy securities and redeem shares rather than accept bank deposits; venture capital funds raise money to invest in private companies and do not provide deposit-like accounts. So, the best answer is commercial banks.

The key idea here is the distinction between institutions that accept deposits from the public and those that don’t. A commercial bank is defined by taking deposits (like checking and savings accounts) and then making loans with those funds, which is why banks are classically thought of as deposit-taking financial institutions. The other options don’t take deposits: finance companies raise funds from borrowings or capital markets to make loans but don’t offer traditional deposit accounts; mutual funds pool investor money to buy securities and redeem shares rather than accept bank deposits; venture capital funds raise money to invest in private companies and do not provide deposit-like accounts. So, the best answer is commercial banks.