passwella.
Menu

WAEC Commerce 1993 Question 42

Question 42

Banking

The difference between an overdraft and a loan is that an overdraft

  1. A.does not yield interest
  2. B.is given to savings account holders only
  3. C.yields interest on the total balance in the account
  4. D.yields interest only on the sum drawn
  5. E.requires no application by the customer before it is granted.
Show the answer and explanation

Answer: D (yields interest only on the sum drawn)

Explanation

With an overdraft, interest is charged only on the amount actually overdrawn; with a loan, interest is on the whole sum.