Statement: Should there be only one rate of interest for term deposits of varying durations in banks? Arguments: I. No. People will refrain from keeping money for longer duration resulting into reduction of liquidity level of banks. II. Yes. This will be much simple for the common people and they may be encouraged to keep more money in banks.a.Both I and II are strongb.Only argument II is strongc.Only argument I is strongd.Either I or II is stronge.Neither I nor II is strong
Question
Statement: Should there be only one rate of interest for term deposits of varying durations in banks? Arguments: I. No. People will refrain from keeping money for longer duration resulting into reduction of liquidity level of banks. II. Yes. This will be much simple for the common people and they may be encouraged to keep more money in banks.a.Both I and II are strongb.Only argument II is strongc.Only argument I is strongd.Either I or II is stronge.Neither I nor II is strong
Solution
The answer to this question depends on the perspective one takes.
Argument I is strong because it considers the financial health of the banks. If there is only one rate of interest for term deposits of varying durations, people may not be incentivized to keep their money in the bank for longer periods. This could potentially lead to a reduction in the liquidity level of banks, which could negatively impact their ability to lend and invest.
Argument II is also strong because it considers the perspective of the common people. Having a single rate of interest would simplify the process and could potentially encourage more people to deposit their money in banks.
Therefore, the answer is (a) Both I and II are strong.
Similar Questions
Which of the following statements is NOT correct?A.The interest rate on a term deposit remains the same for the full duration of the investment.B.There is only one deposit of money for a term deposit.C.The term deposit rate can change for each new term deposit starting,D.A term deposit can adjust its rate when the cash rate target changes before it reaches maturity.
A term deposit offers an interest rate compounding monthlyWhich of the following statements is NOT correct?A.The value on which we calculate the monthly interest resets every month.B.The investor receives the interest on its transactional account every month.C.The interest of a given month is calculated on the value that incorporates all the past interests.D.The interest rate has to be divided by 12 to calculate the monthly interest
Which of the following statements is NOT correct?A term deposit with an interest rate with a quarterly compounding would A.would be accessible without penalty after 2 years. B.would generate larger amount of interest each quarter.C.pay the interests quarterly in the transaction account. D.would calculate the interests using the interest rate .
Banks provide a higher rate of interest on which one of the following accounts?(A) Saving account(B) Current account(C) Fixed deposits for long period(D) Fixed deposits for very short period
f you want a higher interest rate and need to make only a few transactions per month, which type of account should you choose?A.Savings accountB.Money market accountC.Checking accountD.Certificate of deposit
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