Why is there a difference between interest charged and interest earned?
Responses
ABanks are non-profit institutions.
Banks are non-profit institutions.
BBanks are profit-making institutions.
Banks are profit-making institutions.
CBanks must pay more than they receive.
Banks must pay more than they receive.
DThere is no difference between interest charged and interest earned.
There is no difference between interest charged and interest earned.
EBanks must receive more than they pay.
The correct response is: D There is no difference between interest charged and interest earned.
Interest charged refers to the interest that banks charge to borrowers on loans or credit cards. This is how banks make money and generate profits.
Interest earned refers to the interest that banks earn on the money they lend out or invest. This is the income that banks receive from their borrowers.
Both interest charged and interest earned are essentially the same concept but from different perspectives - one from the perspective of the borrower paying interest, and the other from the perspective of the bank earning interest.