An interest rate is the rate at which interest is paid/received on a sum that is borrowed/invested. Interest rates are expressed in percentage terms, and may apply to a certain period. Typically investments that pay interest will specify upfront how the interest is paid and calculated, for example a bond may pay a fixed coupon rate twice a year based on the face value (initial value at issue date), or a bank deposit might pay interest monthly based on daily deposit balances. It is important to know the precise details of an interest rate e.g. frequency and basis of payment, in order to know the true return.
Similar Fund Terms: Rate, Yield
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