There are several types of interest rates, including:
- Simple Interest: a fixed rate applied only to the principal amount.
- Compound Interest: interest that is calculated based on both the principal and the accumulated interest over time.
- Fixed Interest Rate: an interest rate that remains constant over the life of a loan or deposit.
- Variable Interest Rate: an interest rate that changes based on market conditions.
- Nominal Interest Rate: the stated interest rate without adjusting for inflation.
- Real Interest Rate: the nominal interest rate adjusted for inflation.
- Annual Percentage Rate (APR): the total cost of a loan, including interest and fees, expressed as a yearly rate.
- Discount Rate: the interest rate at which a central bank provides short-term loans to commercial banks.
- Prime Rate: the interest rate that commercial banks charge their most creditworthy customers.