Question

What best explains why banks consider interest on loans to be important

Answer 1

Interest helps them cover business costs.

Step-by-step explanation:

Interest refers to the cost of borrowing money from a lender. In modern times, lenders are usually banks, although other institutions and companies can also be money lenders. Therefore, when a person borrows money, he pays interest. When a bank loans money, it earns interest. Interest allows banks to cover business costs. It is also considered a compensation to the lender for taking the risk of lending money.

Answer 2

The correct answer is D) interest helps them cover business costs.

What best explains why banks consider interest on loans to be important is that interest helps them cover business costs.

Banking is big business. When banks loans money they automatically charge you interest. It is called the interest rate. This represents a profit, among the many ways they have to make a profit. This money also helps banks to cover expenses and business costs.

The other options of the question were A) interest helps them to control the economy, B) interest helps them to satisfy customers, and C) interest enables them stockpile money.