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How does a savings bank differ from a savings and loan association?
AIt takes no deposits and lends only to businesses
BIt leans less on mortgages and more on stocks and bonds
CIt is owned by its members rather than by shareholders
DIt holds a far larger share of its assets in mortgages
Answer & Solution
Correct answer: B. It leans less on mortgages and more on stocks and bonds
1. Both savings banks and savings and loan associations are thrift institutions, so both take deposits.
2. A savings and loan association keeps large percentages of its assets in home mortgages.
3. A savings bank focuses less on mortgage loans and more on stock and bond investments.
4. The difference is therefore one of asset mix, not of whether deposits are accepted.
5. Saying the savings bank holds more mortgages inverts the comparison, which is the trap in this item.
6. Member ownership belongs to credit unions, so it does not separate one thrift from the other.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.3 U.S. Financial Institutions_
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