Question

Interest rates are expressed as a percentage of

Answer 1

Interest rates are expressed as a percentage of loans.

Interest rates is expressed as a percentage of the principal amount, that is, the money borrowed in form of loan, or money deposited.

Further Explanation

• The money borrowed from a financial institution in form of a loan attracts an interest which is expressed as a percentage of the principal amount borrowed.
• Interest is therefore the amount of money charged by a financial institutions such as banks or Sacco’s on money borrowed from them by customers.  
• Interest is expressed as a percentage of the principal amount borrowed from these financial institutions.
• Furthermore, money deposited to financial institutions by customers for longer terms may earn them interest depending on the type of account the customer holds with the lending institutions.
• Fixed deposit accounts for example earns an interest to the customer for any money deposited within a given period of time.

Types of Interest on Loans

Simple interest

• This is a type of interest which is a set rate on the principle amount lent to the borrower, such that the borrower pays for the privilege of borrowing money.  
• For example, if an individual borrowed $ 1000, on simple interest at a rate of 10% per annum, for a period of two years, then the customer would pay $200 interest at the end of two years plus the principle borrowed, which totals to $1200.

Compound interest.

• Compound interest is the interest charged on both the principle and the accumulating interest charged on the amount borrowed. Compound interest is the most common type of interest with money lending institutions.
• Therefore, if an individual borrowed $ 1000 and charged compound interest at a rate of 10% per annum, for a period of two years, then the customer would pay a total amount of $ 1210 at the end of two years.

Keywords: Interest, interest rate, loans

Learn more about;

1. Compound interest formula: brainly.com/question/10184698
2. Simple interest formula: brainly.com/question/12164462
3. Interest rate calculation: brainly.com/question/3256069

Level: High school  

Subject: Business

Topic: Simple and compound interest  

Sub-topic: Interest rates

Answer 2

Basically, an interest rate is an amount that is added on top of the principal amount most especially in loans. This is expressed in a form of percentage, depending on the amount and interest rate being agreed upon. The answer for this would be the second option. Hope this helps.