Interest rates are the amount that a borrower pays for to a lender in order to use capital for a specific period of time. Interest rate is also known as the cost of borrowing assets. Interest rates are expressed in terms of annual percentages on the amount that is borrowed or on that portion of the borrowed amount that remains unpaid.
The prime rate is the lending rate that banks or other financial institutions offer to their most creditworthy clients. They are the best interest rates that are offered by banks to people having a financially sound background and impressive credit and payment history at financial institutions.
Interest rates are one of the key factors that investors need to consider before investing in financial instruments, such as bonds, certificate of deposits or cash savings. Investors aim to find the best interest rates to maximize possible returns on the investment.
Over the years, investors have received the best interest rates for long-term investments. This ensures that an investor is well compensated for taking risks and blocking his/her funds for a long period. Risks include inflation and a rise in market interest rates.
