One financial institution is offering a 1% interest rate on savings accounts while another institution is offering a 2% interest rate on savings accounts. Out of the two financial institutions, which offer would the bank probably be offering

Question

Shaylee Woodward

Business

23 August, 13:16

One financial institution is offering a 1% interest rate on savings accounts while another institution is offering a 2% interest rate on savings accounts. Out of the two financial institutions, which offer would the bank probably be offering

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Answers (1)

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Anna · Answer 1

1%

Explanation:

One of the way through which banks make profit is by investing in some other financial institutions. The interest on this type of deposit forms a major component of the banks' profit.

We also need to know that the money invested by banks are the deposit made by the banks customers, who in return is also expecting a certain amount as interest on his deposit.

Based on this explanation, a bank will offer a lower interest rate compared to the financial institution's interest in order to make its share of the of profit on its customers money invested in other financial institution.