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Question
Give reason or explain the following statement:
Rate of interest on fixed deposit is high.
Solution
Rate of interest on fixed deposit is high.
Explanation: Under the fixed deposit system, one has to save money for a fixed period of time. Till the maturity of the period, the customer promises not to demand that money from the bank unless necessary. So, banks are more liberal in loaning out that fund to the seekers from such deposits. As the they are deposited for a comparatively long period of time, the rate of interest offered on such deposits is very high.
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