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Simple interest |
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Simple interestInterest, normally paid annually, which is earned on deposited capital only. Unlike compound interest, the annual interest is not added to the capital. For example, if the capital deposited is £1,000 and the interest rate is £80, you would receive £80 at the end of the first year and at the end of the second year. This contrasts with compound interest, where the £80 interest earned on the first year would be added to the original capital, and the amount of money earning interest in the second year would be £1,080.00.Simple interestInterest calculated as a simple percentage of the original principal amount. Compare to compound interest.Simple interest Similar MatchesInterest rate ceilingInterest rate ceilingSee: Interest rate cap InterestInterestThe amount paid by a borrower to a lender above the amount (the principal) that has been borrowed. Compound interestCompound interestThe process by which interest earned on an investment is added back to the amount invested, so increasing the amount of 'principal' on which further interest will be earned in future years.Compounding is sometimes described as the miracle of investing. The fact is that if you reinvest income in your portfolio, you will end up with a much larger amount than if you spend the income as you go along because of the effect of compounding. But to allow compounding to work its magic, you have to start young.Albert Einstein, when asked what he considered to be mankind's greatest invention, replied 'Compound interest!' Discount InterestDiscount InterestInterest at a beginning of the loan. For example if you take out a one-year loan of $100 at a discount interest rate of 10%, you would receive $90 at the outset. Interest only mortgageInterest only mortgageA mortgage where regular payments (usually monthly) only meet the interest requirements. The interest rate is usually variable and linked to prevailing rates but can be fixed for a given period. The capital amount outstanding remains approximately the same and the borrower will need to make additional provision for repaying this amount at the end of the term of the loan. Further Suggestionsgross interestInterest only strip (IO) insurable interest Variable interest rate Interest Cap mortgage interest deduction Term structure of interest rates interest Interest equalization tax Any interest date Variable interest rate Interest deduction Compound interest Interest rate Capitalized interest Covered interest rate Assumed interest rate Effective annual interest rate Interest Stated annual interest rate Deferred interest mortgage Incidence of interest calculation Matured noninterest bearing debt Nominal interest rate Interest rate |
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