What Is Interest Rate? Meaning & Example
Definition
An interest rate is the cost of borrowing money or the reward for saving it, shown as a yearly percentage. Central bank rate decisions influence rates throughout the economy.
Related terms
A central bank manages a country's money supply and sets key interest rates. Its goals often include stable prices and healthy employment.
APR (Annual Percentage Rate)APR is the yearly cost of borrowing, including interest and certain fees, shown as a percentage. It helps compare loans and credit cards.
BondA bond is a loan you make to a government or company in exchange for regular interest payments and the return of principal at maturity. Bond prices tend to fall when interest rates rise.
What is Interest Rate?
An interest rate is the cost of borrowing money or the reward for saving it, shown as a yearly percentage. Central bank rate decisions influence rates throughout the economy.
Can you give an example of Interest Rate?
Borrowing $10,000 at 6% annual interest costs about $600 in interest in the first year.