What Are Interest Rates?

Interest rates are the cost of borrowing money. They are expressed as a percentage and represent the amount of interest that must be paid on top of the principal loan amount. Interest rates can vary depending on factors such as creditworthiness, type of loan, length of repayment period, and current economic conditions. Generally speaking, higher risk borrowers will have to pay higher interest rates than those with better credit scores or more secure financial situations.

Interest rate changes can also affect investments in stocks and bonds since they tend to move inversely with each other; when one goes up, the other tends to go down. This is because investors may choose to invest their funds into different assets based on which offers them a greater return at any given time. For example, if bond yields increase due to an increase in interest rates then stock prices may decrease as investors shift their funds away from stocks towards bonds for a higher yield investment opportunity.

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