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Interest is payment or receipt of an amount above repayment of the principal sum, at a particular rate. Learn about the origin and evolution of interest in finance, economics, and religion, and its role as the price of credit and the cost of capital.
Compound interest is interest accumulated from a principal sum and previously accumulated interest. Learn about the formula, history, examples, and applications of compound interest, as well as the difference between simple interest and continuous compounding.
For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest.
Learn how to use the rule of 72, the rule of 70, and the rule of 69.3 to approximate the number of periods required for an investment to double or halve at a given interest rate. See graphs, formulas, and examples for different compounding frequencies and rates.
For various interest-accumulation protocols, the accumulation function is as follows (with i denoting the interest rate and d denoting the discount rate): simple interest : a ( t ) = 1 + t ⋅ i {\displaystyle a(t)=1+t\cdot i}
The nominal interest rate is the rate of interest stated on a loan or investment, without any adjustments for inflation. Learn how to convert nominal rates to effective rates, real rates, and annual percentage rates, and see examples and references.
An event is a set of outcomes of an experiment to which a probability is assigned. Learn about different types of events, such as elementary, compound, complementary, and conditional events, and how to calculate their probabilities.
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed. Learn how interest rates vary according to different factors, such as government policies, currency, term, risk, and supply and demand, and how they affect the economy and financial markets.