interest
Sign in to savethumb|right|upright=1.3|A bank sign in Malawi listing the interest rates for deposit accounts at the institution and the base rate for lending money to its customers In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve,
AI overview
Interest is the extra money that a borrower pays to a lender (or that a bank pays to someone who deposits money) on top of the original amount borrowed or deposited. It matters because it's how lenders are compensated for letting others use their money, and it's a key factor that affects how much borrowing costs or how much savings can grow over time.
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Article
40 sectionsContents
- History
- Islamic finance
- In the history of mathematics
- Economics
- Calculation{{anchor|Calculation of interest|Types of interest}}
- Simple interest
- Compound interest
- Other formulations
- Discount instruments
- Rules of thumb
- Rule of 78s
- Rule of 72
- Market interest rates
- Opportunity cost and deferred consumption
- Inflation
- Default
- Composition of interest rates
- Default interest
- Term
- Government intervention
- Open market operations in the United States
- Interest rates and credit risk
- Money and inflation
- Liquidity
- Theories of interest
- Aristotle's view of interest
- Development of the theory of interest during the 1600s and 1700s
- Fructification theory
- <span id=classicalinterest>The classical theory of the interest rate</span>
- <span id=keynescriticisms>Keynes's criticisms</span>
- Theories of exploitation, productivity and abstinence
- <span id=wicksellinterst>Wicksell's theory</span>
- Austrian theories
- Pareto's indifference
- <span id=keynesinterest>Keynes's theory of the interest rate</span>
- Interest-free economy
- See also
- Notes
- References
- External links
thumb|right|upright=1.3|A bank sign in Malawi listing the interest rates for deposit accounts at the institution and the base rate for lending money to its customers In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve, but not at a particular rate decided beforehand, rather on a pro rata basis as a share in the reward gained by risk taking entrepreneurs when the revenue earned exceeds the total costs.
For example, a customer would usually pay interest to borrow from a bank, so they pay the bank an amount which is more than the amount they borrowed; or a customer may earn interest on their savings, and so they may withdraw more than they originally deposited. In the case of savings, the customer is the lender, and the bank plays the role of the borrower.