The main source of profit for financial institutions is
A) their ownership of stocks in commercial corporations.
B) their ownership of real assets received in foreclosures on loans to households.
C) the fees charged for holding and servicing checking accounts.
D) the difference between interest paid on deposits and interest received on loans.
E) the difference between the cost of creating new money and the interest paid on loans.

Question

Quizplus · Accepted Answer

Financial institutions make their profit by collecting interest on loans they provide to borrowers and paying interest on deposits made by customers. The difference between the interest rate charged on loans and the interest rate paid on deposits is known as the net interest margin, which is a major source of profit for financial institutions. Choices A and B are incorrect because they are not the main source of profit for financial institutions. Choice C may provide some revenue for financial institutions, but it is not the main source of profit. Choice E is not applicable as creating money is not a function of financial institutions.

The Main Source of Profit for Financial Institutions Is