Hence, the person depositing money will earn interest from the bank.Ī lender (e.g., a person depositing money in the bank) can earn two different types of interest for lending money: Moreover, if the person deposits money in the bank in savings, the bank will be the borrower, while the depositor will be the lender. Borrowing a bank can help, such as financing a large purchase and debt consolidation. If someone were to borrow money from the bank, they would pay back more than the principal due to interest. The principal is the initial sum of money borrowed or the initial sum deposited/invested. Simple interest is the sum of money a borrower pays to a lender on top of the original principal borrowed. What Is Simple Interest vs Compound Interest?
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