Interest Rates

This video will look at interest rates and discuss their significance in the context of business. From an economics point of view interest rates are viewed as the price of money. If we borrow Money from the bank, we must pay a rate of interest. Likewise if we put money into the bank, the bank may pay us a rate of interest, a reward for paying our money into the bank and allowing them to lend it out two other people at a higher rate of interest.
This gives us a clue as to how banks operate, they pay us a small rate of interest to put our money into the bank and then they lend out a large proportion of that money two others at a higher rate of interest. The difference between the two is their profit.
We may also calculate the return on investment in percentage terms, this is similar to the calculation of the rate of interest.
There are two types of interest rates, simple interest, and compound interest. The video will explore both.