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: -An interest rate tells you how high the cost of borrowing is, or high the rewards are for saving. So, if you’re a borrower, the interest rate is the amount you are charged for borrowing money, shown as a percentage of the total amount of the loan.

Detailed explanation-4: -The interest rate is applied to the principal of the loan, which is the total amount of the loan at the beginning of the loan period. The lender and the borrower agree on a percentage fee, usually on an annual basis, that’s called the annual percentage rate (APR).