Question

Which of the following is true about borrowing money from a bank? A) Only the amount of the loan must be repaid. Eliminate B) The amount of the loan plus interest must be repaid. C) There is no repayment necessary if unemployment occurs. D) There is no benefit to repaying the loan quickly.

Answer 1

B is the correct answer

Answer 2

The second alternative is correct (B).

Banks provide loans to finance the needs of economic agents (people or companies). These needs can be personal or business. For example, a person hires a loan to buy a home. A businessman hires a loan to increase the size of his factory.

The loan is secured by a contract where the contracting party agrees to repay the amount plus interest, which is the bank's profit. This is the way to get the financing done, after all the bank would not have the incentive to lend if it was not to recover the total plus interest.