interest rate

Definition

A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%.

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Related Terms

bond, adjustable rate mortgage, applicable federal rate, Federal funds rate, average weighted maturity, bank rate, barometer, indicator, basis point, benchmark interest rate, broker loan rate, cap, ceiling, floor, consolidated bond, cost of debt capital, coupon rate, cyclical industry, discount rate, duration, econometrics, monetary policy, Federal Open Market Committee, Federal Reserve Board, fixed rate, adjustable rate, income risk, initial interest rate, rate lock, LIBOR, mortgage, loan, prepayment risk, present value, prime rate, rate-improvement, real interest rate, Regulation Q, renegotiable rate, rho, risk-free return, squeeze, standard payment calculation, usury, wraparound loan, yield curve, nominal rate, start rate, market rate

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