What is a fixed charge for borrowing money, typically expressed as a percentage?

What is a fixed charge for borrowing money, typically expressed as a percentage?

• A. Creditor
• B. Interest
• C. Debtor
• D. Finance

Answer: (B)

The term that accurately defines a fixed charge for borrowing money, typically expressed as a percentage, is interest. Interest represents the cost of borrowing money, calculated as a percentage of the principal amount borrowed. It serves as compensation to the lender for the risk of lending and the opportunity cost of the funds being used elsewhere. Interest can be applied with different structures, such as simple interest, which is calculated on the principal alone, or compound interest, which is calculated on the principal plus any accumulated interest. This percentage can vary based on factors such as the borrower's creditworthiness, the type of loan, and prevailing market rates. In contrast, the other terms have different meanings: a creditor is the lender who provides the funds, a debtor is the individual or entity that borrows and is obligated to repay the borrowed amount, and finance refers to the broader system of managing money, which includes saving, borrowing, and investing. Thus, interest is the most accurate term to describe the fixed charge in borrowing contexts.

The term that accurately defines a fixed charge for borrowing money, typically expressed as a percentage, is interest. Interest represents the cost of borrowing money, calculated as a percentage of the principal amount borrowed. It serves as compensation to the lender for the risk of lending and the opportunity cost of the funds being used elsewhere. Interest can be applied with different structures, such as simple interest, which is calculated on the principal alone, or compound interest, which is calculated on the principal plus any accumulated interest. This percentage can vary based on factors such as the borrower's creditworthiness, the type of loan, and prevailing market rates.

In contrast, the other terms have different meanings: a creditor is the lender who provides the funds, a debtor is the individual or entity that borrows and is obligated to repay the borrowed amount, and finance refers to the broader system of managing money, which includes saving, borrowing, and investing. Thus, interest is the most accurate term to describe the fixed charge in borrowing contexts.