What is Interest Rate?
It is the charge levied on principal amount by lender to borrower for the use of asset for particular period of time. Interest rate is usually expressed in percentage form. It is basically calculated on an annual basis, referred as annual percentage rate (APR). The assets lend by lender may include property, cash, jewelry, consumer goods, vehicle etc. In some cases, if it is a high value asset such as building or vehicle, then interest calculated is called as ‘lease rate’.
Why You Care
Interest is levied by lenders as a payment for use of an asset. By lending a high value asset, a lender can generate lucrative return from the assets which he owns.
Simple Interest = P (principal) x I (annual interest rate) x N (years)
Compound Interest = P (principal) x [(1 + I (interest rate) N (months)) - 1]
Federal Reserve Governor,
Federal Reserve Chairman,
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