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What is the core business of a brokerage firm?
ATaking deposits and lending them out at a higher rate
BInsuring the securities its clients hold against loss
CSetting the price at which new shares are first sold
DBuying and selling securities and advising its clients
Answer & Solution
Correct answer: D. Buying and selling securities and advising its clients
1. A brokerage firm buys and sells securities, meaning stocks and bonds, for its clients.
2. It also gives those clients related advice.
3. Many brokerage firms offer some banking services beside this, such as a combined checking and savings account at a high interest rate.
4. Taking deposits as its core business would make it a depository institution, and a brokerage firm is not one.
_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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