The percentage by which the money the borrower pays back exceeds the m

The percentage by which the money the borrower pays back exceeds the money that was borrowed is called as

Bank rate

Nominal interest rate

Real interest rate

Terms of credit

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This question was previously asked in

UPSC CDS-1 – 2021

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The nominal interest rate is the stated percentage increase in money that the borrower pays back over and above the principal amount borrowed. It represents the cost of borrowing or the return on lending, expressed as a percentage per period (usually annually), without adjusting for inflation.

– It is the rate agreed upon by the lender and the borrower.
– The total amount paid back includes the principal plus the nominal interest.

The Bank Rate is the rate at which a central bank lends money to commercial banks. The Real interest rate is the nominal interest rate adjusted for inflation, reflecting the true cost of borrowing or earning in terms of purchasing power. Terms of credit refer to the conditions under which a loan is granted, including the interest rate, repayment schedule, fees, etc.

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