Companies try to arouse the interest of customers or consumers.
Interest is a term that comes from the Latin interesse ( "to import" ) and has three main meanings. On the one hand, it refers to the affinity or tendency of a person towards another subject, thing or situation.
For example: “My main interest is music” , “Estela's only interest is romantic literature” , “The child does not show any interest in class” .
The idea of interest, in this case, refers to an attraction or motivation . It may be a simple curiosity or a true passion.
Interest as convenience
Interest , on the other hand, is the utility or convenience sought on a moral or material level.
In this context, its meaning is pejorative, since it names the attitude of a person who seeks to take advantage of another: “Néstor is with you only out of interest,” “That is a gift made out of interest,” “I think he calls me only out of interest .” interest to get him tickets to the party. This class of people are called interested parties.
The concept in economics
The axes around which the economy revolves are three: the government , the financial system and the external sector . The various agents that influence economic development are located in them: citizens offer labor to companies, which provide goods and services for their consumption; The government, for its part, is responsible for mediating between the various levels of the economy through measures that favorably influence progress (ideally, its responsibility lies in ensuring a fair distribution of wealth, although in practice this usually not seen).
The government controls the economy by taking sides in issues related to consumption, investment and management expenses, forcing citizens to make contributions (taxes) with which economic balance would be ensured. When it comes to investments, the government can raise the interest rates that investors have to pay, so the number of investors would decrease.
The notion of interest, then, is used in economics and finance to mention the gain, benefit, value , utility or profit of something.
By calculating the interest of a fixed term you can know its performance.
Interest as an index of profitability or cost
Interest, on the other hand, is the index that is used to indicate the profitability of a savings or investment or the cost of a loan : “The last fixed term gave me an interest of 10.1% per year,” “The credit was granted by a single signature with an interest of 25% and fixed installments” , “This month they credited me twenty pesos for the interest” .
This notion of interest indicates how much money is obtained (or must be paid) in a certain period of time . A loan of 1,000 pesos with an annual interest of 10% implies that, after twelve months, the person must return 1,100 pesos.
In the same sense, interest allows us to calculate the profit granted by a bank deposit. A fixed term of $2,500 for one year, with an annual interest of 15%, will mean a profit of $375.
The interest on a loan tends to rise as the risk of default increases.
The rates
For their part, interest rates represent the value that money has in the financial market . This means that the more money there is, the rate goes down and when it is scarce, it goes up.
When it rises, borrowers request fewer loans from financial intermediaries and providers seek to create new resources to increase their savings. On the contrary, when the rate drops, more credits are requested and borrowers withdraw their savings funds.
Interest rates
It is also worth mentioning that there are different types of interest rates.
We can talk about the passive or deposit rate (which is what the financial intermediaries pay to those who trust them with their monetary resources) and the active or placement rate (which is what the banks or intermediaries receive for the loans they grant), for example. example.
The simple interest rate , meanwhile, is applied to the capital that is initially invested, without adding the funds that the money itself produces. The compound interest rate , on the other hand, incorporates the funds that are obtained into the general capital and considers that sum in generating the new interest.
We speak of a fixed interest , on the other hand, when the rate remains unchanged throughout the entire term contemplated in a loan. Variable interest , on the other hand, can change during the duration of the transaction. In this case, the interest rate is calculated based on a different one (such as a reference index or inflation).
Regarding loans, a distinction is also made between the nominal interest rate (a fixed percentage that is agreed upon as payment for the money lent, which the financial institution charges on each of the receipts) and the annual rate . equivalent (a reference interest that refers to the effective cost of the loan over a year).