No matter which financial product you invest in, you need to understand its interest and interest rates. So, what is the difference between interest and interest rate?
What is the difference between interest and interest rate?
The meaning of interest and interest rates
From the perspective of its form, it is the reward that the currency owner receives from the borrower for issuing currency funds; on the other hand, it is the price that the borrower must pay for using the currency funds. There are two main categories:
1. Money other than the principal obtained from deposits and loans.
2. It refers to the value-added amount brought by the injection and return of monetary funds to the real economy sector. Less abstractly, interest generally refers to the remuneration paid by the borrower (the debtor) to the lender (the creditor) for using the borrowed currency or capital. Also known as child gold, mother gold (principal) symmetry. The formula for calculating interest is interested = principal × interest rate × deposit period (that is, time).
Interest is the remuneration paid to the owner of the funds for lending the funds, and it comes from the use of the funds by the producer to perform operational functions.
Represents the ratio of the amount of interest to the principal within a certain period of time, usually expressed as a percentage, and calculated annually is called the annual interest rate. In fact, interest rates are also one of the tools of economic regulation. When the economy is overheating, interest rates are raised; when the overheated economy and inflation are under control, interest rates are appropriately lowered. Therefore, interest rates are one of the important fundamental economic factors. Interest rate is an important financial variable in economics. Almost all financial phenomena and financial assets are more or less related to the interest rate.
The difference between interest and interest rates
In investment and wealth management, interest is an amount, and an interest rate is a ratio. The interest rate is the standard for calculating interest. The principal multiplied by the interest rate and then multiplied by the time is the interest. The interest rate, also known as the interest rate, represents the ratio of the amount of interest to the principal in a certain period of time, usually expressed as a percentage, and calculated annually is called the annual interest rate. Their calculation formulas are:
Interest rate = interest ÷ principal ÷ time × 100%
Interest = interest rate × principal × time × 100%