WEEK 6-7

• The interest rate is the amount a lender charges a borrower and is a percentage of the principal— the amount loaned.
• Simple interest is calculated on the principal, or original, amount of money that is either invested or borrowed
• Compound interest is calculated on the principal amount and also on the accumulated interest of previous periods.
• Real Interest Rates - are interest rates adjusted for the expected erosion of purchasing power resulting from inflation.
• Nominal Interest Rates - is the stated or advertised rate of interest on a financial product without adjusting for inflation.
• Lending Rates - refers to the range (high and low) of lending rates reported by commercial banks on a daily basis.