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Why do banks give loans?
I believe that the market will go up around 10% per year on average. How does it make sense for banks to loan out money at a rate less than the average of the market? It seems like they should be able to make more than that.
My only guess is that they are allowed to lend money out to people but not allowed to put it in the market due to being FDIC insured or because the money isn't theirs or something. Is there a market for a bank where they would give you a higher rate on your savings account (let's say 8%) but they were allowed to invest in the stock market if they see fit? |
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