Interest rate

An interest rate is the price paid for borrowing money or the return earned by lending or depositing it, expressed as a proportion of principal over time.

Simple interest: Interest calculated only on the original principal, without adding prior interest to the base. It shows how a rate works when interest does not compound.
Mortgage: A loan secured by real estate, commonly used to purchase a home. Mortgage rates directly affect monthly payments and total home-financing costs.
Principal (finance): The original amount of money borrowed, invested, or deposited, excluding interest. The rate is applied to this base amount to calculate interest.
Fixed interest rate: An interest rate that remains unchanged for a specified period or the life of an agreement. It contrasts with rates that reset as market conditions change.
Compound interest: Interest calculated on principal plus interest accumulated in earlier periods. It makes the effective cost or return grow beyond the stated rate.
Bond yield: The return an investor earns on a bond, based on its payments and market price. Bond yields connect market interest rates with the value of fixed-income investments.
Time value of money: The principle that money available now is worth more than the same amount later. Interest rates express the compensation for exchanging money across time.
Variable interest rate: An interest rate that changes over time according to a benchmark or contractual formula. Its payments can rise or fall, unlike those under a fixed rate.
Annual percentage rate: An annualized measure of borrowing cost that may include fees as well as interest. It translates a quoted loan rate into a broader measure of borrowing cost.
Central bank: A public institution that manages a country's money supply and monetary policy. Central banks influence short-term rates to pursue goals such as price stability.

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