Which type of financial institution is federally licensed to accept deposits and issue loans?

The correct answer is the type of financial institution that is federally licensed to accept deposits and issue loans is a bank. Banks are financial entities that are authorized to provide various financial services, which primarily include accepting deposits from customers and offering loans to individuals and businesses. This dual capability is facilitated by federal regulations, which ensure that banks operate under strict guidelines to protect consumer funds and maintain financial stability.

In contrast, credit unions also accept deposits and issue loans but function as member-owned cooperatives. They often have a more limited focus regarding membership eligibility and may not be federally licensed in the same manner as traditional banks. Investment firms primarily deal with the buying and selling of securities and do not accept deposits or provide traditional loan services. Insurance companies focus on offering policies and coverage to protect against various risks, which does not include banking services such as accepting deposits or issuing loans.