What does the term 'interest rate' refer to?
Correct Answer: Interest rate is the percentage charged on loans or paid on deposits.
- Step 1: Understand that 'interest' is the cost of borrowing money or the reward for saving money.
- Step 2: Know that 'interest rate' is expressed as a percentage.
- Step 3: Realize that when you borrow money, the interest rate is the extra amount you pay back on top of the original amount borrowed.
- Step 4: When you save money in a bank, the interest rate is the extra money the bank pays you for keeping your money with them.
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