what is Interest Rates

Posted on 01-05-2016        By leena

what is Interest Rates:- CS notes mcq books

Interest rate is the price demanded by the lender from the borrower for the use of borrowed money. 

In other words, interest is a fee paid by the borrower to the lender on borrowed cash
as a compensation for forgoing the opportunity of earning income from other investments
that could have been made with the loaned cash. Thus, from the lender’s perspective, interest
can be thought of as an “opportunity cost’ or “rent of money” and interest rate as the rate
at which interest (or ‘opportunity cost’) accumulates over a period of time. The longer the
period for which money is borrowed, the larger is the interest (or the opportunity cost). The
amount lent is called the principal. Interest rate is typically expressed as percentage of the
principal and in annualized terms. From a borrower’s perspective, interest rate is the cost of

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