SIE Knowledge of Capital Markets Practice Question 21

Correct Answer: B

Explanation:

B: Choice B is correct. As mutual funds consistently provided higher returns than the interest earned on Certificates of Deposit (CDs), bank customers were moving liquid funds from CDs to mutual funds. So some banks made arrangements with brokerage firms to assist their banking customers on the bank's own premises. Choice A is incorrect, as low interest rates were the catalyst driving bank customers to increasingly use mutual funds. Choice C is incorrect, because the first limit was $2,500. Later limits were $5,000, $10,000, $15,000, $20,000, $40,000, and $100,000. In 2008, it was raised to $250,000. Choice D is incorrect because banks were strictly required to make quite clear to their customers investing in mutual funds on the bank's premises that those investments were not insured by the FDIC, and all or part of their investment could be lost.