Question : ___________ is the interest rate charged by banks on loans and advances.
Option 1: Loan rate
Option 2: Deposit rate
Option 3: Discount rate
Option 4: Prime rate
Correct Answer: Loan rate
Solution : The correct answer is (a) Loan rate.
The loan rate refers to the interest rate charged by banks on loans and advances provided to borrowers. It represents the cost of borrowing for individuals, businesses, or other entities that require funds from a bank.
When a bank lends money, it charges interest on the principal amount as compensation for the risk and opportunity cost associated with lending. The loan rate can vary based on factors such as the type of loan, the creditworthiness of the borrower, the prevailing market conditions, and the bank's own policies.
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