Question

people have to pay higher interest on loans that the interest they recueve on a fixed deposit for the same time period why do you think this is so?

Answer 1

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

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