You place $500 into your checking account at First Bank and earn 1% APR on your deposit.Your professor borrows money at a rate of 8% from the same bank for a tuition loan for her son.Which of the following statements is true?
A)The bank is criminally liable to you for paying an interest rate lower than the expected rate of inflation.
B)You and your professor have an obvious conflict of interest because you have accounts at the same financial institution.
C)You benefit from earning interest on your deposit,safety for your funds,and having a recognizable means for paying for your financial obligations without having to hold cash.
D)Your professor is the only party to be made worse off by this example because she is the only party paying net interest.

Question

Quizplus · Accepted Answer

Option C correctly identifies the benefits of having a checking account, while options A and B are incorrect and irrelevant to the given scenario. Option D is partially correct but incorrectly suggests that the professor is the only one paying interest; in reality, the interest earned by the bank on deposits like yours helps offset the interest paid out to borrowers like your professor.

You Place $500 into Your Checking Account at First Bank