ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Interest rate is the amount charged over and above the principal amount by the lender from the borrower. In terms of the receiver, a person who deposits money to any bank or financial institution also earns additional income considering the time value of money, termed as interest received by the depositor.

Detailed explanation-2: -The interest rate is the amount a lender charges a borrower and is a percentage of the principal-the amount loaned. The interest rate on a loan is typically noted on an annual basis known as the annual percentage rate (APR).

Detailed explanation-3: -In a way, a bank borrows money from their depositors by using the deposited funds to lend money to other customers. In turn, the bank pays the depositor interest for their savings account balance while simultaneously charging their loan customers a higher interest rate than what was paid to their depositors.

Detailed explanation-4: -Bank Rate determines the interest rate we pay to commercial banks that hold money with us. It influences the rates those banks charge people to borrow money or pay on their savings.

Detailed explanation-5: -When you borrow money, interest is the cost of doing so and is typically expressed as an annual percentage of the loan (or amount of credit card borrowing). When you save money it is the rate your bank or building society will pay you to borrow your money. The money you earn on your savings is also called interest.