Question

Savings institutions obtain most of their funds from

a. savings and time deposits.
b. repurchase agreements.
c. loans.

Answer 1

Savings institutions mainly obtain their funds from savings and time deposits, which are used to make loans, particularly for housing. While repurchase agreements and investments may also contribute, the primary source of funding comes from depositor accounts. This structure supports the institution's vital role in the financial system.

Step-by-step explanation:

Savings institutions, commonly known as savings and loans or thrifts, primarily obtain their funds from savings and time deposits. These types of deposits are the main source of funds for most savings institutions. Customers, or depositors, place their money into savings accounts or invest in time deposits, like certificates of deposit (CDs), which not only provide them with a secure place to save but also earn them interest over time. Savings institutions use the funds from these deposits to make loans, including housing-related loans as required by historical federal laws.

Savings institutions diversify their financial activities by also engaging in other transactions, such as money market funds and possibly repurchase agreements, but the core of their funding comes from the deposits made by individuals and businesses. These depository accounts function as the primary fuel that powers the lending activities of savings and loan institutions, thereby facilitating the institution's role in the financial system.

Due to regulations and the nature of their financial transactions, savings institutions rely heavily on customer deposits to sustain their operations and provide loan services mainly for housing. This relationship between depositor funds and loans is integral to understanding the operations of banks, credit unions, and savings institutions in the financial marketplace.

Answer 2

Savings institutions, or 'savings and loans,' primarily obtain their funds from savings and time deposits. They use these deposits to provide housing-related loans and to invest in financial products like government bonds, with the aim of managing risks and supporting their operations. Option A is the correct answer.

Step-by-step explanation:

The question is asking where savings institutions primarily obtain their funds. To answer this question, it's important to understand the role and functions of savings institutions in the financial system. Savings institutions, also known as 'savings and loans' or 'thrifts,' are financial entities that focus on accepting savings and time deposits from individuals and then using those funds to provide loans, primarily for housing.

Savings institutions traditionally were limited in the interest they could offer and were required to make a significant portion of their loans in the form of housing-related loans. This history has shaped their role in the financial system as institutions where people can save securely while also supporting the community through housing loans. Additionally, savings institutions might use these deposits to invest in various financial products such as government bonds to diversify their portfolio and manage risks.

Considering the information provided and the structure of savings institutions, the correct answer to the question is option (a): savings and time deposits are the primary source of funds for savings institutions. Repurchase agreements (b) and loans (c) are not typically the main sources of funds for these institutions.