Interest

Interest

- The term "Interest" is a fee paid for the use of another party's money. To the borrower it is the cost of renting money, to the lender the income from lending it.

Components of Interest:
> Principal
> Interest
> Interest Rate
> Term
> Final Amount or Maturity Value 

 

The image represents interest together with the stick figure

Interest Rates

How is this even related to business at all?


 Having interest rates is essential for a business like a bank to assure that it can profit and continue to run despite the loans it provides. It also helps us keep track of the money being lend and the amount that needs to payback by some people. It calculates the remaining or the total borrowed money, depending on the purpose of you going to the bank.

The image represents the bank and the money

 Interest rates have big impacts on our little business and it's crucial points could be so we could protect the fiscal health of your company.


Another thing that we should consider is that consumers  will either buy or not your product. This can affect the status of your financial state and without the interest rates, we don't have the sufficent knowledge to compute the product or the profit gained from the customers.

According to a website,  "Interest rates affect consumer spending. The higher the rate, the higher their loans will cost them, and the less they will be able to buy on credit. This is how it affects inflation, If consumer spending goes down, there will be less demand for products and services, thus prices won't rise as rapidly. Interest rates are used by central banks as a means to control inflation."

Just as the sentence stated, it is important to have interest so we can manage our loans and money more efficiently.