ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Commercial Banks A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal, and mortgage loans, and offers basic financial products like certificates of deposit (CDs) and savings accounts to individuals and small businesses.

Detailed explanation-2: -What are the Different Types of Interest? The three types of interest include simple (regular) interest, accrued interest, and compounding interest. When money is borrowed, usually through the means of a loan, the borrower is required to pay the interest agreed upon by the two parties.

Detailed explanation-3: -If nominal interest rates rise, the bank experiences a loss in capital because the interest rates on its short-term funding adjust more rapidly than on its long-term assets. This loss depletes the bank’s capital buffer and brings it closer to regulatory or market capital requirements.

Detailed explanation-4: -Interest is the money you owe when borrowing or receive when lending. Lenders calculate interest as a percentage of the loan amount. Consumers can earn interest by lending money (such as through a bond or certificate of deposit) or depositing funds into an interest-bearing bank account.