Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

How do banks primarily make money from investments in securities?

By earning interest and dividends from securities they hold

By printing new money for their customers

By charging customers a fee for every deposit

By only holding cash reserves and not investing in any assets

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Verified step by step guidance

Understand the role of banks in financial markets: Banks are financial intermediaries that manage funds and invest in various assets, including securities, to generate income.

Identify the types of income banks earn from securities: Banks primarily earn interest from debt securities (e.g., bonds) and dividends from equity securities (e.g., stocks) they hold.

Eliminate incorrect options: Banks do not print money for customers, as this is the role of central banks. Charging fees for deposits is not a primary income source related to securities, and holding only cash reserves without investing would not generate returns.

Focus on the correct mechanism: Banks invest in securities to earn returns, which is a key part of their profit-making strategy. This includes interest income from bonds and dividend income from stocks.

Conclude the reasoning: The correct answer is that banks primarily make money from investments in securities by earning interest and dividends from the securities they hold.