Banks & Interest

If the amount paid back is $2200 and the amount borrowed is $2000, what is the interest?

• $100

• $150

• $200

• $250

Which of the following is a factor that affects interest rates?

• Lender’s alternatives

• Borrower's height

• Borrower's age

• Borrower's favorite color

Which of the following factors can cause interest rates to vary?

• Time

• Borrower's favorite movie

• Borrower's pet's name

• Borrower's favorite book

How do banks make money from loans?

• By charging fees

• By charging interest

• By selling assets

• By investing in stocks

What happens when borrowers repay loans with interest?

• The bank loses money

• The bank breaks even

• The bank makes money

• The bank returns the money to the government

What do banks do with the interest they earn from loans?

• Pay interest on deposits

• Invest in new technologies

• Donate to charity

• Pay employee salaries

Why do banks practice Fractional Reserve Banking?

• To increase their profits by loaning out money.

• To keep all deposits safe.

• To avoid paying interest on deposits.

• To reduce the number of customers.

What is the key difference between Fractional Reserve Banking and Full Reserve Banking?

• Fractional Reserve Banking keeps all deposits, while Full Reserve Banking loans out all deposits.

• Fractional Reserve Banking loans out a portion of deposits, while Full Reserve Banking keeps all deposits.

• Fractional Reserve Banking does not accept deposits, while Full Reserve Banking does.

• Fractional Reserve Banking is illegal, while Full Reserve Banking is not.

What is one of the main purposes of keeping a reserve in Fractional Reserve Banking?

• To invest in real estate.

• To ensure liquidity for withdrawals.

• To pay off bank loans.

• To increase bank profits.

Why do banks want to attract deposits?

• To increase their capital for lending

• To reduce their liabilities

• To avoid paying taxes

• To decrease their assets