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What is the amount of money a bank charges for the privilege of allowing a person to borrow money or the amount of money the bank pays a person for depositing his money for the bank to invest called?

This question is part of Unit 1: Banking Basics and Services
Asked by Ahubbard, Last updated: Sep 27, 2020

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2 Answers

Barry Mclean

Barry Mclean

Ask me anything!

Barry Mclean
Barry Mclean, Sales Manager, MBA, Ewa

Answered Apr 10, 2019

The correct answer to this question is interest. It is a payment from a borrower to a lender. Interest is more than the rate of the amount borrowed. Historian Paul Johnson dates this practice back to 5000 BC during Middle Easter civilizations, however the first written evidence is from 2400 BC. During this time, interest was used on agriculture.

Nowadays, interest is on loans, cars, and saving accounts. There are two times of interest rates, which are simple and compound interest. Simple interest is calculated by Principal x interest rate x n = interest. Compound interest is calculated by Principal x interest rate - interest for year one.

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John Smith

John Smith

John Smith
John Smith

Answered Dec 22, 2016

Interest
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