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Rate of Interest

   Also found in: Dictionary/thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia, Hutchinson 0.01 sec.
Rate of interest
The rate, as a proportion of the principal, at which interest is computed.

Rate of Interest
A percentage of an amount of money, calculated every so often, that is used to compensate a lender for the money borrowed. That is, a rate of interest exists as part of a loan or similar agreement and is based on the amount of money one borrows. A rate of interest is usually expressed in terms of its annual percentage rate, or what the interest rate would be without taking into account the effects of compounding. A rate of interest on a loan may be fixed, meaning that it may not be changed over the life of the loan, or floating, meaning that it may change. Rates of interest are important for encouraging or discouraging investment in stock. For example, if the rate of interest on a bond (which is a loan) yields more than a stock, an investor would likely be more inclined to invest in the bond. See also: Plain vanilla swap, Prevailing interest rates.


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