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.
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