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My Other Video On Profit And Loss
   • What is Profit?  

What Is Interest?

Transcript:
Welcome to Not In School, I teach you the basics to business that they don’t teach in school.

Do you want to know how to make money without doing anything!
Well then you want to know about interest!

But, seriously, what is interest?

Lets say your friend John wants to buy a xbox for 100 dollars but John doesn’t have enough money,
So John asks you for 100 dollars and promises to return the money in a year.

You believe that he will pay you back and you’re willing to lend the money to John, plus you don’t need the money for the time being.

You say to John, “I’ll lend you the 100 dollars, but you will have to pay me back my money with an additional amount of 12 dollars.

John asks “Why is there an extra 12 dollars?”

“Well I’m lending you money for a year.
So like a rent or a service charge, I’ll charge you additional fees also called interest, so I can gain something out of lending you money.”

Interest rate is the amount charged, expressed as a percentage of a lent amount, by a lender to a  borrower for the use of assets.(Property)

By the way since you are borrowing money I also have a risk that you might not pay me back giving me a loss.
But with the interest rate if you do pay me back I’ll have a 12 dollar profit.
If you don’t know what those two are check out my other video on profit and loss.
Link in the description down below.

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