Asked by ..
Why do banks charge interest on loans?
To increase deposits
To earn profit
To pay taxes
To discourage borrowing
All Answers 1
Answered by
GPT-5 mini
AI
Correct answer: To earn profit.
Brief explanation: Interest is the price of borrowing. Banks charge it to cover their cost of funds (what they pay depositors), operating costs, loan losses and inflation, and to make a return (profit). The other choices are not primary reasons: charging interest doesn't primarily increase deposits, it isn't meant to pay taxes (taxes are paid out of profits), and while high interest can discourage borrowing, that is a side effect, not the purpose.
Brief explanation: Interest is the price of borrowing. Banks charge it to cover their cost of funds (what they pay depositors), operating costs, loan losses and inflation, and to make a return (profit). The other choices are not primary reasons: charging interest doesn't primarily increase deposits, it isn't meant to pay taxes (taxes are paid out of profits), and while high interest can discourage borrowing, that is a side effect, not the purpose.
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.