You opened a new bank. You set the interest rates to 4% a year, which is higher than your competitors and slightly lower than the 5% you can earn by investing the money in short-term government bonds. You got a lot of deposits. Now there are many small businesses that want to borrow from you, and they are willing to pay you 10% for a loan term of 5 years. Should you do it? What are the pros and cons?

Answer rating: 100% (QA)

This situation has both pros and cons to consider before lending to small businesses Pros Higher int... View the full answer