Final answer:
Banks attract depositors by offering interest-bearing savings accounts, which are protected by the FDIC up to $250,000. These accounts offer a low risk, low rate of return, but provide easy access to funds (high liquidity). The interest paid on deposits is a basic example of a rate of return.
Step-by-step explanation:
The question pertains to the role of banks in offering a safe place to keep money and the benefits of bank accounts, including earning interest on deposits.
To attract depositors, banks offer savings accounts that pay interest, making them attractive places to keep money. Additionally, banks may borrow funds from larger banks or a central bank, like the Federal Reserve in the United States, to lend to others or invest in financial instruments seeking higher returns.
Bank accounts provide safety and convenience to financial investors. The FDIC (Federal Deposit Insurance Corporation) ensures that depositors' funds are secure up to $250,000, adding to the security offered by banks over more makeshift savings methods.
This guarantees that if a bank goes bankrupt, customers' deposits are protected. However, this safety comes at the cost of a lower rate of return compared to higher-risk investments. Yet, the high liquidity of bank accounts, meaning easy and quick access to funds, makes them a popular financial tool.
In summary, when a depositor places their money in a bank account, they can expect a low risk, low rate of return, but the advantage of high liquidity. The interest rate received on a savings account is a simple example of a rate of return, providing earnings to depositors for lending their money to the bank.