Question

Which of these best fits the definition of interest, as it applies to finance?
a.
Interest is the money earned by investing.
b.
Interest is the cost of borrowing money.
c.
Interest is the cost of investing poorly.
d.
Interest is the portion of a loan which must be repaid every year.


Please select the best answer from the choices provided

A
B
C
D

Answer 1

B

Interest is the fee (cost) charged for borrowing money — which is also the return earned by the lender or investor.