Interest

Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate (APR). It's how lenders earn money from loans and how banks compensate depositors for using their funds. In business, interest affects the cost of capital and is a critical factor in financial planning, investments, and budgeting. The rate of interest is determined by the risk of the loan, the time period of the loan, and the supply and demand for credit. High interest rates can discourage borrowing and can reduce the amount of money in circulation, which can slow economic growth. Conversely, low interest rates can encourage borrowing and spending, leading to economic expansion.