Definition Interest: Everything you ever wanted to know about interest rates.

Definition Interest: Everything you ever wanted to know about interest rates.

If you invest your capital in the capital market, you naturally want to receive a return for it. In the investment area, there are several types of income that can be obtained by the investor depending on the type of investment chosen. In addition to price and currency gains, it is mainly dividends and interest rates that represent the most common type of income. In particular, it is the interest that is paid to the investor in numerous secure investments as a form of income. However, interest rates are not only reflected in the investment area, but also in financing, namely in the form of lending rates. See http://dmsband.org/payday-loans-online-cash-advance-loans-direct-lender-offers-just-for-you/

Interest in the investment and credit sectors

Interest in the investment and credit sectors

In the case of investments, the customer receives interest for his capital invested in a financial investment. The interest-bearing investment forms include, for example, savings accounts, fixed-term and overnight money accounts and interest-bearing securities, primarily bonds. The investor receives these interest in return for making his capital available to the bank or another company. Similarly, interest rates also work in the credit sector. In this case, however, the bank is the party receiving the interest because it lends its capital or the money of other customers. In return, the customer, in this case the borrower, has to pay interest to the bank. In principle, interest rates are based on several factors, such as the general market interest rate or the product the bank offers in detail.

Difference between effective and nominal interest rates

Difference between effective and nominal interest rates

There is an important difference in both investment and funding terms in terms of interest rates between nominal and effective interest rates. In the investment area, for example, effective interest rates are usually lower than nominal interest rates, because in this case there are often certain fees and expenses that reduce returns for the investor. In principle, the effective interest rate equals the return that can be achieved by the investor, while the nominal interest rate is merely the nominal interest rate, which has not yet been adjusted for the costs. The situation is similar in the lending sector, except that the effective interest rate there is generally higher than the nominal interest rate, since, for example, repayment offset or fees must be included.


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