The interest charged on loans is determined by the _______?

A. Exchange rate
B. Fiscal policy
C. Risk associated with the loan
D. Rate of production in the country

Correct Answer:

Option C – Risk associated with the loan

Explanation

They make money on the interest they charge on loans because that interest is higher than the interest they pay on depositors’ accounts. The interest rate a bank charges its borrowers depends on both the number of people who want to borrow and the amount of money the bank has available to lend.