23
QuizMultiple Choice

Globalization and International Trade — Unit test

Question 23 • EA Academy Civics 9

What is the best definition of an interest rate?

Answer
A
the money that a bank pays as interest to depositors on their savings accounts
B
the percentage that compares a bank’s deposits to its loans in a given period of time
C
the total amount that a bank branch can provide to borrowers as a business or personal loan
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 cost of borrowing money, expressed as a percentage of the amount borrowed. For example, if a borrower pays $5 in interest on a $100 loan, the interest rate is 5%. Choice D describes this comparison; choice A describes one way interest may be paid, not the rate itself.

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