Bus 404

HW-Module-6

Chapter-14

Q-1. How do the balance sheets of saving institutions differ from those of commercial
banks? How do their sizes compare?

Ans. Many saving funds establishments in the US hold home loans in portfolio. Business banks
not really. On the other hand business banks are impressively bigger, however it relies upon the
ground served. A farm may have a fewer branch bank with not a large portion of the benefits of a
single branch FSB in a metropolitan area.

Q-4. What are the main assets and liabilities held by savings institutions?
Ans. Majority of assets side consists of MBS, consumer and home loans. However liabilities
section consists repos, borrowed money and federal funds.

Q-6. What does it mean when a savings institution is a mutual organizations?

Ans. It means customers own the company rather than individual groups of stockholders. Many
insurance companies are usually acts as savings and mutual organizations.

Q-9. How and why is credit union membership limited?

Ans. Membership for credit union is limited because of The Federal Credit Union Act of 1934
limited membership. “In order to join a credit union, you must be in a credit union’s specific field of
membership (FOM). Credit union members must have some commonality, called a common
bond, such as occupation, affiliation, or where you reside (a defined community). A credit union
can include more than one occupational or associational common bond, or even a combination
of occupational and associational common bonds in its field of membership. The description of
the common bond defines those eligible for membership. The field of membership is those

eligible for membership.” [ CITATION Cre15 \l 1033 ]

Q-12. How does the size of the credit union industry compare to the commercial banking
industry?

Ans. With the fact of limited membership, expansion and variety of tasks commercial banks
serve on a larger scale than the credit unions.

Q-18. How did the corporate credit unions perform during the financial crisis?

Ans. Financial crisis often expose institutions as they did to credit union system .Financial crisis
had hardest effects on institutions investing in higher risks. Corporate credit unions also showed
almost $18 bn in unrealized losses in securities. (2008)

Q-19. What are three types of finance companies and how do they differ from commercial
banks?

Ans. There a three types of finance companies including, sales finance institutions that
specialize in making loans to specific retailers, personal credit institutions that specialize in
making installments and other loans to consumers with low or bad credit and business credit
institutions that specialize in providing financing to corporations specially through equipment
leasing. However commercial banks are owned by stockholders and they are operated for a
profit, and engage in various lending activities.

Q-21. What are the major assets and liabilities held by finance companies?

Ans. Business and consumer loans that are also called accounts receivable, are the major
assets and liabilities held by finance companies.
Chapter- 15

Q-1. How does the primary function of an insurance company compare with that of a
depository institution?

Ans. Insurance services offered by financial institutions compensate individuals and

corporations if a pre-specified adverse event occurs, in exchange for premiums paid to the
insurer by the policyholders. Depository institutions exist in many different types. Anytime of the
day you hand your money to a person with the expectation that the person will hold it for you and
give it back upon request made by you.

Q-3. Contrast the balance sheets of depository institutions with those of life insurance
firms?

Ans. A noteworthy comparability between depository organizations and insurance companies is

the high level of monetary influence acquired by both firms. Both request funds and utilization
them to fund a benefit portfolio predominately comprising of obligation securities. A noteworthy
distinction between them is their arrangement of the liabilities, which is altered for depository
companies. While the face estimation of bank deposit is fixed.

Q-5. What are the similarities and differences among the four basic lines of life insurance
products?
Ans. The four main lines of life insurance products include ordinary, group, industrial and credit
life. “Ordinary life is sold on an individual premise and speaks to the biggest section of the life
insurance market. The insurance arrangement can be organized as immaculate life insurance or
may contain a saving component. Group strategies are like conventional extra security
arrangements aside from that they are midway directed, giving expense economies in
assessing, screening, offering, and overhauling the approaches. Industrial life has to a great
extent been supplanted by group life since expense economies have made group life more
reasonable. Industrial life was generally promoted to people who might make little, extremely visit
installments and would oblige individual gathering administrations. Credit life regularly is term life
sold in conjunction with some obligation contract.” [ CITATION Ins13 \l
1033 ]
Q-6. Explain how annuities represent the reverse of life insurance activities?

Ans. An average life insurance contract obliges a periodic installment by one group for a
guaranteed installment of either a bump whole or an annuity if a specific occasion happens, for
example, passing or a mischance. An annuity speaks to a converse contract where the gathering
buys the privilege to get occasional installments relying upon the economic situations.

Q-7. How can life insurance and annuity products be used to create a steady stream of
cash disbursements and payments so as to avoid either the payment or receipt of a
single lump sum cash amount?

Ans. A life insurance approach obliges normal premium installments which then qualifies the
recipient for a single bump aggregate. Endless supply of such an irregularity entirety, a single
annuity could be gotten which would create general money installments until the estimation of the
protection arrangement is exhausted.

Q-9. How does the regulation of insurance companies compare with that of depository
institutions?
Ans. Insurance agencies are only subject to state regulations contrasted with banks and thrifts.
There are national protection associations, for example, the National Association of Insurance
Commissioners, the organizations themselves are controlled by the state offices. Banks and
thrifts are normally subject to both national and state oversight. While both banks and insurance
agencies get administrative investigation as to the nature of their benefits and liabilities, bank
regulations additionally manage least hold and capital necessities. Banks have more geographic
restrictions.
Oops Times up!!!