Today, the amount requested for the amounts loaned for the purpose of saving and not consuming, or loaned to someone else without being used for any other purpose, is called interest, and the proportional expression of this is called the interest rate. It is one of the most important factors determining the time value of money. Others are expected rate of return and cost of capital.
Interest rate; It can be expressed as periodic interest rate, annual simple interest rate or compound interest rate. The periodic interest rate is used to determine the amount of interest to be paid or collected at the end of a certain period. The annual simple interest rate is the periodic interest rate calculated for the entire year. Compound interest rate is the interest rate used to determine the cumulative interest amount to be received if principal and interest amounts are continuously borrowed or loaned over several consecutive equivalent periods.