Without usury laws,banks will
A) charge very high interest rates to all borrowers.
B) charge higher interest rates to riskier borrowers than to safer borrowers.
C) charge very low interest rates to all borrowers.
D) face no demand for loans.

Question

Quizplus · Accepted Answer

Without usury laws, banks are free to charge higher interest rates to riskier borrowers to compensate for the increased risk of default. Safer borrowers will still receive lower interest rates to encourage borrowing, but the rates will be higher overall without the restriction of usury laws. Option A is incorrect because banks cannot charge excessively high interest rates as it would discourage borrowing and lead to banking competition. Option C is incorrect because banks need to maintain a profit and limit risk, and thus cannot charge very low interest rates to all borrowers. Option D is incorrect because there will always be a demand for loans, even if interest rates are higher.

Without Usury Laws,banks Will