Meaning, Kinds of Interest - Interest | 11th Economics : Chapter 6 : Distribution Analysis
Chapter: 11th Economics : Chapter 6 : Distribution Analysis
Interest
Generally speaking, interest is a payment made by a borrower to the lender for the money borrowed.
Interest
Generally
speaking, interest is a payment made by a borrower to the lender for the money
borrowed.
1. Meaning
Interest
is the reward paid by the borrower to the lender for the use of capital.
“Interest is the price paid for the use of capital in any
market”
-ALFRED MARSHALL
2. Kinds of Interest
Gross Interest
Gross
interest is the total interest amount received by creditors from debtors.
Gross
Interest = (Net Interest) + (reward for inconvenience) + (insurance against
risk of non-repayment) + (payment for service of debt management)
Net Interest
Net
Interest is only a part of the gross interest. It is the payment for use of
capital only.
A good example
for net interest is the interest payable for Government Securities.
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11th Economics : Chapter 6 : Distribution Analysis : Interest | Meaning, Kinds of Interest
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11th Economics : Chapter 6 : Distribution Analysis