Interest rate
Also called: APR, APY
An interest rate is the price of borrowing money, stated as a percentage of the loan per year. For savers it is the reward for lending their money to a bank.
Banks pay depositors less than they charge borrowers and keep the difference. Rates across the economy follow the central bank's policy rate.
APR is the yearly rate without compounding; APY includes compounding, so it's the better figure for comparing savings accounts.
In Journey Shares
Game savings earn a little under the Federal Reserve's published rate on reserve balances; margin loans cost more than it. →
Related terms
- Federal funds rate: The federal funds rate is the interest rate at which US banks lend reserves to each other overnight.
- Compound interest: Compound interest is interest earned on both your original money and the interest it has already earned, so savings grow faster over time.
- Risk-free rate: The risk-free rate is the return on an investment with no default risk, usually taken as the yield on short-term US Treasury bills.
- Bond: A bond is a loan to a government or company that pays the lender interest (the coupon) and returns the full amount (the face value) at a set date.
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