Interest (Elementary)
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds. Interest can also be earned by lending stock, bonds, or other financial assets. Interest is typically expressed as a percentage of the principal, which is the original amount of the loan or deposit.
History of Interest
The concept of interest dates back to ancient times, when it was used as a form of compensation for the use of assets. In the Middle Ages, interest was seen as a form of usury, and was banned by the Catholic Church. However, by the 16th century, interest was accepted as a legitimate form of compensation for the use of money. In the modern era, interest is a common form of compensation for the use of money, and is used in a variety of financial transactions.
Comparison of Interest Rates
| Type of Loan | Interest Rate |
|---|---|
| Mortgage | 3.5% |
| Car Loan | 4.5% |
| Credit Card | 15.99% |
| Savings Account | 0.5% |
Summary
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds. Interest can also be earned by lending stock, bonds, or other financial assets. Interest is typically expressed as a percentage of the principal, which is the original amount of the loan or deposit. For more information on interest, you can visit websites such as Investopedia, Bankrate, and the Federal Reserve Bank.
See Also
- Principal
- Compound Interest
- Simple Interest
- Annual Percentage Rate (APR)
- Loan
- Credit
- Debt
- Bond
- Stock
- Investment
