Question

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?

Answer 1

Answer:

Heyaa

Explanation:

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.

Answer 2

Answer:

, 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.