Glossary

An interest rate is the percentage of the principal amount (the amount borrowed or invested) that a borrower must pay to a lender or that a saver earns from a financial institution. 📈

It's the cost of borrowing money or the return on investment (ROI) for depositors. Interest rates can be fixed (remaining constant for the entire loan term) or variable (changing according to market conditions).

For example, if you take out a $10,000 loan with a 5% annual interest rate, you'll pay $500 in interest over one year. 🏦

Fun fact: Central banks, like the US Federal Reserve, often use interest rates as a monetary policy tool to control inflation and promote economic growth. 🏛️ They can raise or lower interest rates to influence borrowing and investment activities, affecting the overall economy.