Interest Rate Definition Math

As a result they can speed up or slow down the economy.

Interest rate definition math. Interest is the money paid for the use of someone else s money or assets. The interest rate is typically noted on an annual basis known as the annual. Interest rates affect the cost of loans. An interest rate is the amount of that payment over a specified term.

Interest amount 500 borrowed money 2500 time 5 years r 500 100 5 2500 4. Simple interest p i n where. The interest rate is the amount a lender charges for the use of assets expressed as a percentage of the principal. Alex borrows 1 000 for 7 years at 6 simple interest.

There is a formula for simple interest. Alex invests 1000 at a 6 yearly interest rate and so receives 60 in interest after a year. When you know the principal amount the rate and the time the amount of interest can be calculated by using the formula. The principal is the amount of money loaned.

For instance if the previous borrower agrees to pay back the 100 100 owed in one year s time then the annual interest rate is 5 5. Interest is the cost of borrowing money and an interest rate tells you how quickly those borrowing costs will accumulate over time. For example if someone gives you a one year loan with a 10 interest rate you d owe them 110 back after 12 months. Si prt where p principal r rate of interest t time of period.

How much is paid for the use of money as a percent. Also find the definition and meaning for various math words from this math dictionary. Because 1000 6 60. Interest inter quartile range iqr learn what is interest rate.

The federal reserve manages interest rates to achieve ideal economic growth. Interest rates obviously work against you as a borrower. Plus the principal of 1 000 means alex needs to pay 1 420 after 7 years. An interest rate is the percentage of principal charged by the lender for the use of its money.