Interest

Definition

Interest refers to the cost of borrowing money or the return on investment. It is the amount paid by a borrower to a lender, or earned by an investor from their investments.

Related terms

Principal: The initial amount of money borrowed or invested, before any interest is added.

Compound Interest: Interest that is calculated not only on the initial principal but also on any previously accumulated interest.

Nominal Interest Rate: The stated interest rate without considering inflation or compounding effects.