INTEREST RATE: The price of funds expressed as a percentage of the total amount loaned or borrowed. This is the cost of borrowing funds and the payment received for lending. Interest rates are invariably expressed as an annual percentage of the amount borrowed/loaned. A 10 percent interest rate, to run through an easy example, tells us that the cost of borrowing $1,000 for one year is $100. See also | real interest rate | opportunity cost | risk premium | inflation premium | investment | capital | dividend | financial markets | yield | prime rate | federal funds rate | interest-rate effect | government borrowing | investment borrowing |
