Interest

AAA

DEFINITION of 'Interest'

1. The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

2. The amount of ownership a stockholder has in a company, usually expressed as a percentage.

Interest is commonly calculated using one of two methods: simple interest calculation, or compound interest calculation.

INVESTOPEDIA EXPLAINS 'Interest'

1. Lenders make money from interest, borrowers pay it.

2. Someone who holds more than 5-10% of the stock in a company is said to hold significant interest.

RELATED TERMS
  1. Gross Interest

    The annual rate of interest to be paid on an investment, security ...
  2. Accrued Interest Adjustment

    The extra amount of interest that is paid to the owner of a convertible ...
  3. Net Interest Margin

    A performance metric that examines how successful a firm's investment ...
  4. Cash Advance

    A service provided by many credit card issuers allowing cardholders ...
  5. Commitment Fee

    A fee charged by a lender to a borrower for an unused credit ...
  6. Funding Agreement

    A low-risk, fixed-income investment. A funding agreement offers ...
RELATED FAQS
  1. How does a company choose between debt and equity in its capital structure?

    There are two types of capital, debt and equity, and each has both benefits and drawbacks. Debt financing is capital acquired ... Read Full Answer >>
  2. How can investors use trends in the unemployment rate to evaluate the outlook of ...

    Credit services companies provide financial services in the form of credit and loans to individuals and businesses; these ... Read Full Answer >>
  3. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  4. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  5. How do you find accrued interest on a bond?

    A bond is a debt instrument issued by a company, government agency or municipality to raise money. Interest payments are ... Read Full Answer >>
  6. What are the main disadvantages of fixed income securities?

    Fixed-income securities attract investors because they provide guaranteed returns in the form of fixed, regular cash payments. ... Read Full Answer >>
Related Articles
  1. Credit & Loans

    5 Keys To Unlocking A Better Credit Score

    Follow these tips and techniques to rebuild a ruined credit rating.
  2. Home & Auto

    Got A Good Mortgage Rate? Lock It Up!

    Rising rates mean rising profits for lenders, providing incentive to increase rates whenever possible.
  3. Investing Basics

    How Interest Rates Affect The Stock Market

    Whether you're buying lunch, a home or a stock, you're influenced by interest rates.
  4. Taxes

    Tax Deductions On Mortgage Interest

    If you're a homeowner, this is one item you want to understand and use on your return.
  5. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  6. Investing Basics

    Interest Rates And Your Bond Investments

    By understanding the factors that influence interest rates, you can learn to anticipate their movement and profit from it.
  7. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  8. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.
  9. Bonds & Fixed Income

    Understanding Negative Rates Of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?
  10. Economics

    The Fed's Impact On Emerging Markets

    Higher US interest rates could make it more expensive for emerging market borrowers to service their debt commitments.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center