Ace the AFP Exam 2025 – Boost Your Financial Wizardry!

A commercial bank is a type of financial institution that plays a critical role in the economy by accepting deposits from individuals and businesses, and using those deposits to provide loans. This dual-function of accepting deposits and making loans allows commercial banks to facilitate savings and investment in the economy, helping individuals manage their finances and businesses fund their growth.

Deposits made by customers, such as checking and savings accounts, provide banks with the necessary capital to lend to borrowers in the form of personal loans, mortgages, and business loans. This process not only supports consumer spending and investment but also contributes to overall economic stability and growth.

Other financial institutions mentioned, such as brokerage firms and mutual fund providers, primarily act as intermediaries in the investment market and do not typically accept deposits or make loans. Consumer credit companies, on the other hand, focus on providing credit to consumers but do not function as traditional depositories. Thus, the distinguishing characteristic of a commercial bank is its role in both accepting deposits and making loans, making it the correct answer.