Question

Banks that offer low interest rates to people with good credit

A. maximize profits at little risk.
B. sacrifice profits for less risk.
C. maximize profits at great risk.
D. sacrifice profits for more risk.

Answer 1

The answer is: B. sacrifice profits for less risk.

Interest rates influence the amount of money that the borrower had to give back to the bank and  Higher interest rate would give higher profit for the bank.

When bank people give low interest rates for people with good credit, the number of revenue that bank would make from giving the loan would decrease. But people with good credit has high likelihood of returning the money they borrow, which mean that there is less risk for the bank.

Answer 2

Banks that offer low-interest rates to people with good credit maximize profits at little risk. Thus the correct answer is A.

What is the significance of a low-interest rate?

A low-interest rate signifies that borrowers will tend to take credit amounts from banks for their investments. It shows that banks are encouraging investors to borrow funds.

When a person with good credit borrows funds from the banks it reflects maximises profits a little risk because the good credit shows that the borrower make timely payment of their debts.

Therefore, option A maximizes profits at little risk is appropriate.

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