Respuesta :
A payday loan company charges 6 percent interest for a two-week period. The yearly interest rate is 156%.
What is Interest Rate?
An interest rate is the portion of the principal that the lender charges for the usage of its funds. The loaned sum of money is known as the principle.
The price of loans is impacted by interest rates. They can therefore make the economy grow or shrink. To promote the best possible economic growth, the Federal Reserve controls interest rates.
The cost of borrowing money or the incentive to save it is represented by an interest rate. It is determined as a percentage of the borrowed or saved sum.
When you take out a mortgage on a home, you borrow money from banks. A car, an appliance, or education financing are all possible with other loans. Banks borrow money from you in the form of deposits, and they compensate you for the use of the funds deposited by paying interest.
Loans are funded with the money from deposits.
Banks charge depositors a somewhat lower interest rate than they do borrowers. Their profit accounts for the discrepancy. Interest rates remain in a small range because banks compete with one another for both depositors and borrowers.
Therefore, Interest is the charge for borrowing money.
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