ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The borrower pays interest, and the lender receives it.

Detailed explanation-2: -For most loans, interest is paid in addition to principal repayment. Loan interest is usually expressed in APR, or annual percentage rate, which includes both interest and fees. The rate usually published by banks for saving accounts, money market accounts, and CDs is the annual percentage yield, or APY.

Detailed explanation-3: -Components of a Loan Principal: This is the original amount of money that is being borrowed. Loan Term: The amount of time that the borrower has to repay the loan. Interest Rate: The rate at which the amount of money owed increases, usually expressed in terms of an annual percentage rate (APR).

Detailed explanation-4: -To put it simply, interest is the price you pay to borrow money – whether that’s a student loan, a mortgage or a credit card. When you borrow money, you generally must pay back the original amount you borrowed, plus a certain percentage of the loan amount as interest.

Detailed explanation-5: -A bank earns a spread on the funds it lends out from those it takes in as a deposit; the net interest margin (NIM) represents this spread, which is simply the difference between what it earns on loans versus what it pays out as interest on deposits.