Which term is defined as the percentage charged by a lender for borrowing money?

Which term is defined as the percentage charged by a lender for borrowing money?

• A. Asset
• B. Interest rate
• C. Debt
• D. Loan

Answer: (B)

Interest rate is the percentage charged by a lender for borrowing money. It represents the cost of using someone else’s funds and is typically quoted annually as the APR. For example, borrowing $1,000 at a 5% interest rate would cost about $50 in interest over one year (ignoring compounding for simplicity). The other terms describe different things: an asset is something you own, a debt is money you owe, and a loan is the borrowed amount or the agreement itself, not the charge for borrowing.

Interest rate is the percentage charged by a lender for borrowing money. It represents the cost of using someone else’s funds and is typically quoted annually as the APR. For example, borrowing $1,000 at a 5% interest rate would cost about $50 in interest over one year (ignoring compounding for simplicity). The other terms describe different things: an asset is something you own, a debt is money you owe, and a loan is the borrowed amount or the agreement itself, not the charge for borrowing.