Friday, January 27, 2012

Interest Rate

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

If you have any further questions or would like to add to this fund management term, then please submit your thoughts below.

Fund Management Terminology and Concepts Explained:


  1. Exactly. Interest applies on every loan and it increases if the load is not paid on due dates.

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  2. Payment terms have to be properly allocated. This is to come up with ideal funding system.

  3. True. Thanks for the informative article. Others are not aware of these. Anyway, good thing I know how to manage my investment.

  4. The other investor will pay the original investor an amount of money and then the new investor will become the one who is entitle to receive the coupon payments and principal at a future date.
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