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Financial Dictionary

 

Atlantic Financial
Investment Word

Interest Rate

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An Interest Rate is an amount which is charged (or paid) for the use of money. An interest rate is often expressed as an annual percentage of the principal.

Interest Rates are calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies.

For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be: (90/1000)*100% = 9%

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