Hello this question is incomplete. The complete question would be:
"Which of the following loans will typically offer the lowest interest rate?
Payday loan
Federal Student Loan
Private Loan
Both A and B."
Answer:
Both A and B.
Explanation:
Among the options given in the above question, we can state that the ones with the lowest interest rate are: Federal Student Loan and Private Loan
.
First and foremost, you need to see interest as a relationship between a certain amount of money and a certain period of time. So, in a nutshell: interest is a percentage payoff paid to anyone who makes a loan or makes an investment, for example.
In practice, this rate acts as compensation for the time the money was borrowed or invested.
Here's just one example: Imagine you borrowed from the $ 5,000 bank. The agreement is that you return the sum of interest in 1 year. Then, when you return it to the institution, you will pay more than what you borrowed.
Let's say that in this case, after the 12 months combined you paid back $ 5,800. Therefore, the interest rate percentage in this example was 16% per year.
That is, the interest rate is directly linked to the difference between the amount borrowed and the amount returned. In the example we used, the difference between the initial amount and the amount paid 1 year later was $ 800. We can then say that this $ 800 was the interest accrued in the period.
