Banking Awareness - Types Of Bank Accounts
Why do demand deposits usually offer lower interest compared to time deposits?
Why do demand deposits usually offer lower interest compared to time deposits?
medium Q14 of 15
Step-by-Step Solution
Step 1: Understand bank perspective.
Banks cannot freely use highly liquid funds.Step 2: Identify the main reason.
High liquidity reduces the bank’s ability to lend long-term.Final Answer:
They provide high liquidity to customers → Option DQuick Check:
Higher liquidity = lower interest ✅
Quick Trick: Liquidity and interest move in opposite directions.
Common Mistakes:
- Assuming regulation alone decides interest rate.
Master "Types Of Bank Accounts" in Banking Awareness
Start learning the concept with an interactive lesson.
Want More Practice?
15+ quiz questions · All difficulty levels · Free
Free Signup - Practice All QuestionsMore Banking Awareness Quizzes