A Bank Borrows Funds from Its Depositors by Paying Them

question 43

Multiple Choice

A bank borrows funds from its depositors by paying them 2% interest on the funds.It lends those funds to borrowers by charging an interest of 5% on the loans.The bank's spread is

• A)2 percent.
• B)3 percent.
• C)4 percent.
• D)5 percent.

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Definitions:

Corrosive

Materials or substances that have the ability to destroy or damage other materials through a chemical reaction.

Ozone Layer

A stratospheric layer containing a high concentration of ozone, which protects the Earth from the sun's harmful ultraviolet radiation.

Methyl Bromide

A toxic gas used as a pesticide and for fumigation, known to deplete the ozone layer and hazardous to human health.

PCBs

Polychlorinated biphenyls, a group of toxic chemical compounds known for environmental persistence and health hazards.