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Interest rates are expressed as a percentage of loans.

Interest rates is expressed as a percentage of the principal amount, that is, the money borrowed in form of loan, or money deposited.

Further Explanation

  • The money borrowed from a financial institution in form of a loan attracts an interest which is expressed as a percentage of the principal amount borrowed.
  • Interest is therefore the amount of money charged by a financial institutions such as banks or Sacco’s on money borrowed from them by customers.  
  • Interest is expressed as a percentage of the principal amount borrowed from these financial institutions.
  • Furthermore, money deposited to financial institutions by customers for longer terms may earn them interest depending on the type of account the customer holds with the lending institutions.
  • Fixed deposit accounts for example earns an interest to the customer for any money deposited within a given period of time.

Types of Interest on Loans

Simple interest

  • This is a type of interest which is a set rate on the principle amount lent to the borrower, such that the borrower pays for the privilege of borrowing money.  
  • For example, if an individual borrowed $ 1000, on simple interest at a rate of 10% per annum, for a period of two years, then the customer would pay $200 interest at the end of two years plus the principle borrowed, which totals to $1200.

Compound interest.

  • Compound interest is the interest charged on both the principle and the accumulating interest charged on the amount borrowed. Compound interest is the most common type of interest with money lending institutions.
  • Therefore, if an individual borrowed $ 1000 and charged compound interest at a rate of 10% per annum, for a period of two years, then the customer would pay a total amount of $ 1210 at the end of two years.

Keywords: Interest, interest rate, loans

Learn more about;

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  2. Simple interest formula: https://brainly.com/question/12164462
  3. Interest rate calculation: https://brainly.com/question/3256069

Level: High school  

Subject: Business

Topic: Simple and compound interest  

Sub-topic: Interest rates

The interest rate is a proportion of the principal, that is the amount borrowed, that a lender charges a borrower. The annual percentage rate (APR) is the term used to describe the interest rate on a loan.

Option B is the correct answer, borrowers pay interest on the money they borrow in the form of a loan, which is expressed as an interest rate. It is usually expressed as a percentage (%) of the total amount borrowed loan. So, if you borrow $100 and pay back $110, you have a straightforward 10% interest rate. A country's interest rates are normally determined by its central bank's base rate.    

Option A is the incorrect answer because fees payable to use financial goods, such as trading fees, expense ratios, and broker costs, are examples of investment fees. Investment fees are among the most important factors of investment performance, and every investor should pay attention to them.

Option C is the incorrect answer because In contrast to interest, which is guaranteed by the bank regardless of how much profit the bank makes. The percentage of profit is calculated by dividing the gains you made by the original amount you invested.

Option D is the incorrect answer because a tax liability is a payment owed to a state, municipal tax, or federal authority by a corporation, another entity, or an individual.

Therefore, a loan percentage is expressed as the interest rate. So, Option B is the correct answer.

For more information related to interest rates, refer to the link:

https://brainly.com/question/16140567?referrer=searchResults

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