Question

select the correct choice
a. borrowers repay the principal amount of the loan, less interest, so banks make back some but not all of the money lent.
b. borrowers repay the principal amount of the loan, plus interest, so banks recover more money for each loan than was lent.
c. borrowers repay only the interest on any loan, but the interest is always greater than the amount lent.
d. banks do not make money from offering loans and typically use other sources of revenue.

Explanation:

To determine the correct option, we analyze how loans work in banking:

• Option A: Incorrect. Borrowers repay principal plus interest, not less interest.
• Option B: Correct. When a borrower takes a loan, they repay the principal (the amount lent) plus interest (the cost of borrowing), so the bank gets back the principal + interest, which is more than the principal lent.
• Option C: Incorrect. Borrowers repay principal plus interest, not only interest, and interest is not always greater than the amount lent (it depends on the rate and time).
• Option D: Incorrect. Banks primarily make money from the interest on loans.

Answer:

B. Borrowers repay the principal amount of the loan, plus interest, so banks recover more money for each loan than was lent