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What is Interest Rate? Definition, Types & History

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

Which of the following is NOT a factor in the determination of an interest rate on borrowed money?

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1. What is the relationship between a borrower's credit score and their interest rate on a loan?

2. In 1970, McDonald's Big Mac costs around $0.50. By early 2015, the price of the sandwich was at $4.79. This change in cost is an example of:

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About This Quiz & Worksheet

Interest rates reflect the general condition of the economy and have a significant impact on whether businesses and industries will expand, as well as whether sales and consumer consumption will increase or decrease. This quiz/worksheet combo will help you understand the history of interest rates, how they work and the factors used to set them.

Quiz & Worksheet Goals

In these assessments, you'll be tested on:

  • The definition of interest rates
  • The effect of time on interest rates
  • Types of benchmark rates
  • The evolution of interest rates
  • The relationship between credit scores and interest rates

Skills Practiced

This quiz and worksheet allows you to test the following skills:

  • Knowledge application - use your understanding of interest rates to explain their effect on the economy
  • Defining key concepts - ensure you can accurately define key terms such as opportunity cost and inflation
  • Distinguishing differences - compare and contrast benchmark interest rates and common interest rates
  • Making connections - examine the role of interest rates in monetary policy

Additional Learning

To learn more, review the accompanying lesson, What is an interest rate? Definition, Types & History. This lesson covers the following objectives:

  • Understand how the use and calculation of interest rates changed over time
  • Explain the impact benchmark rates have on mortgages and car loans
  • Describe the role of the Federal Reserve Bank in setting interest rates
  • List the factors that can affect the interest rates on small loans
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