Editing Interest rate (section)

{{Short description|Percentage of a sum of money charged for its use}}
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An '''interest rate''' is the amount of [[interest]] due per period, as a proportion of the amount lent, [[Deposit (finance)|deposited]], or borrowed (called the [[principal sum]]). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed.

The '''annual interest rate''' is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually [[rate of return#Annualization|annualized]].

The interest rate has been characterized as "an index of the preference . . . for a dollar of present [income] over a dollar of future income".<ref>{{cite book |last1=Fisher |first1=Irving |title=The Rate of Interest: Its Nature, Determination and Relation to Economic Phenomena |date=1907 |publisher=The MacMillan Company |location=New York |isbn=1578987458 |page=3 |url=https://archive.org/details/rateofinterestit00fishuoft/page/n29/mode/2up}}</ref> The borrower wants, or needs, to have money sooner, and is willing to pay a fee—the interest rate—for that privilege.