What is the amount of money a bank charges for the privilege of - ProProfs Discuss

# What is the amount of money a bank charges for the privilege of allowing a person to borrow money or the amount of money the bank pays a person for depositing his money for the bank to invest called?

A. Loan
B. Mortgage
C. Interest

This question is part of Unit 1: Banking Basics and Services
Asked by Ahubbard, Last updated: Mar 31, 2020

#### Barry Mclean

Barry Mclean, Sales Manager, MBA, Ewa

The correct answer to this question is C, interest. It is a payment from a borrower to a lender. Interest is more than the rate of the amount borrowed. Historian Paul Johnson dates this practice back to 5000 BC during Middle Easter civilizations, however the first written evidence is from 2400 BC. During this time, interest was used on agriculture.

Nowadays, interest is on loans, cars, and saving accounts. There are two times of interest rates, which are simple and compound interest. Simple interest is caclulated by Principal x interest rate x n = interest. Compound interest is calculated by Principal x interest rate - interest for year one.

John Smith