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People have to pay a higher interest on loan than the interest they receive on a fixeddeposit for the same time-period. Why do you think this is so? |
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Answer» HeyaaExplanation:PEOPLE PAY higher interest rates on loans as some RISK is involved there. When a bank pays an interest on deposit, it means that the bank is effectively BORROWING at that rate. When the bank lends the same money it needs to have a spread which should be a little higher than the interest paid on the deposit. This difference will cover the cost of operating the bank and also the risk premium of engaging the bank in a loan transaction.Thus both rates are RELATED to each other. |
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