Tell my why this reasoning is wrong:
>bank loans you at x%
>therefore the profit the bank makes is at least x% (correct for your chance of not paying back)
>otherwise they would loan it for more
>>1266082
It's not wrong, it's just a massive oversimplification. Banks could also charge fees on top of just the loan. The real money value of the loan also fluctuates due to inflation.
>>1266098
I should clarify that I mean the profit the bank makes with other ventures, not from you. Still correct?
>>1266082
No they loan at x (cist of money for them) plus y (the spread - fees etc so they make a profit)
>>1266082
Wrong. The bank also has some cost of capital y%. So their profit is x% - y%.
the bank makes more than x% because they loan it out 9 times. fractional reserve banking. the market keeps the interest lowish. it is as high as the competition allows.
