The annual interest rate of 5% means that the interest rate of bank deposits is 0.5% of the annual principal. That is, the interest rate is 5%. The domestic interest rate of 5% usually refers to the deposit interest rate. The annual interest rate is a statement of interest, calculated in years, that is, the sum of interest for one year.
Interest is the use fee of money in a certain period of time, and it refers to the reward that money holders (creditors) get from borrowers (debtors) for lending money or monetary capital. Including deposit interest, loan interest and interest generated by various bonds. Interest is the use fee of money in a certain period of time, and it refers to the reward that the holder (creditor) of combined money gets from the borrower (debtor) for lending money or monetary capital.
Factors that arouse interest:
1, delayed consumption
Lenders lend money, which is equivalent to delaying the consumption of consumer goods. According to the principle of time preference, consumers will prefer current goods to unsold goods, so there will be positive interest rates in the free market.
2. Expected inflation
Inflation will occur in most economies, which means that a certain amount of money will buy less goods in the future than it does now. So the borrower needs to compensate the lender for the losses during this period.
3. Alternative investment
Lenders can choose to invest their money in other investments. Due to the opportunity cost, the lender lends money, which is equivalent to giving up the possible return on other investments. Borrowers need to compete with other investments for this fund.
4. Investment risk
Borrowers are at risk of bankruptcy, absconding or not paying their debts at any time, and lenders need to charge extra fees to ensure that they can still get compensation under these circumstances.