Interest has more than one definition in finance. First, it refers to the charge imposed on a borrower for borrowing money, which can be either a cost or a way for the trader to make money. A shareholder's share of a company's stock can also be referred to as their ownership percentage.

Many trades involve lending or borrowing money, so interest is an important concept for traders. Interest rates are usually expressed as a percentage of the borrowed amount. Both private lenders and central banks lend to private banks in this way. Base rates are the rates at which central banks lend.

Interest is the cost of borrowing money or the reward for saving or investing it. When you borrow money, interest is the extra amount you pay the lender in addition to repaying the principal. Conversely, when you save or invest, interest is the earnings you receive from a bank or financial institution for using your funds.

Interest rates are typically expressed as a percentage and can vary depending on factors like the loan type, creditworthiness, and economic conditions. There are two main types of interest: simple interest, calculated only on the principal amount, and compound interest, which is calculated on both the principal and accumulated interest. Interest plays a crucial role in finance, affecting loans, savings, and investments.