Answers Personal Finance Practice TestQuestion 5

5

practice testMultiple Choice

Practice Test

Question 5 • Personal Finance

What is the best definition of an interest rate?

Answer

A

the total amount that a bank branch can provide to borrowers as a business or personal loan

B

the money that a bank pays as interest to depositors on their savings accounts

C

the percentage that compares a bank’s deposits to its loans in a given period of time

D

the percentage that compares the amount of interest paid to a bank to the amount given as a loan

Explanation

An interest rate is the percentage charged or earned on a loan or deposit over a period of time. Choice D describes the interest paid on a loan compared with the amount borrowed. Choice B is only one possible interest payment, not the definition of the rate.

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