poureu ddily Q.No.2: Discuss briefly about the interest rate and its compounding
Answers
Answer:
The interest rate is the amount a lender charges a borrower and is a percentage of the principal—the amount loaned. The interest rate on a loan is typically noted on an annual basis known as the.
Explanation:
The interest rate is the amount charged on top of the principal by a lender to a borrower for the use of assets.
An interest rate also applies to the amount earned at a bank or credit union from a deposit account.
Most mortgages use simple interest. However, some loans use compound interest, which is applied to the principal but also to the accumulated interest of previous periods.
A borrower that is considered low risk by the lender will have a lower interest rate. A loan that is considered high risk will have a higher interest rate.
Consumer loans typically use an APR, which does not use compound interest.
The APY is the interest rate that is earned at a bank or credit union from a savings account or CD. Savings accounts and CDs use compounded interest.
Understanding Interest Rates
Interest is essentially a charge to the borrower for the use of an asset. Assets borrowed can include cash, consumer goods, vehicles, and property.