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Home Interest Definition of Interest

 

Definition of Interest:

 

"Interest is the price paid by the borrower to the lender for the use of borrowed funds during a certain period".

 

In the words of Eastham:

 

"Interest is the payment for parting with the advantage of liquid control of money balances".

 

According to Batch:

 

"Interest is the price paid for the use of money or credit".

 

It is normally expressed as a percentage on the funds loaned or borrowed.

 

In the words of J. M. Keynes:

 

"Interest is the premium which has to be offered to induce people to hold their wealth in some form other than hoarded money".

 

Example:

 

For instance, if a man gives a loan of $1000 to a needy person for a year and charges 9% per annum as the price for the use of loaned funds, we say that the rate of interest in 9% per annum.

 

The payment which is generally made for the use of money loan able funds is in fact a gross interest. Pure interest is only a part of the gross interest.

Relevant Articles:

Definition of Interest
Analysis of Gross Interest
Difference in Interest Rates and Annual Percentage Rate (APR)
Difference in Gross Interest Rates
Theories of Interest/Why is Interest Paid
 

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