# Ch 5: Interest Rate Types & Risks

These lessons illustrate the various types of interest that are charged by banks and credit card companies. Familiarize yourself with them through the Interest Rate Types & Risks chapter of this study guide.

## Interest Rate Types & Risks - Chapter Summary and Learning Objectives

Interest is nothing more than a fee paid for the privilege of using someone else's money. We pay interest when we borrow from a bank or lending institution of some kind, and banks pay interest to us when they use the money we deposit in savings, checking and investment accounts. In this chapter, our instructors will walk you through how interest is charged, how rates are set, the types of interest normally charged and some of the calculations involved. The lesson topics include the following material:

• Definition and explanation of simple interest
• How to compute simple interest
• Why and how credit card companies set an effective annual rate
• Explanation of interest rate risk and more

## Course Topics

LessonObjective
What is Interest Rate? Definition, Types & History Explain what interest is and how interest rates are set.
Comparing Variable & Fixed Interest Rate Loan Distinguish variable vs. fixed rate interest.
How to Find Simple Interest Rate: Definition, Formula & Examples Describe and calculate simple interest.
Effective Annual Rate: Formula & Calculations Examine and assess the role of annual effective rates charged on credit card accounts.
Interest Rate Risk: Definition, Formula & Models Discover how to compute interest rate risk.

5 Lessons in Chapter 5: Interest Rate Types & Risks
Test your knowledge with a 30-question chapter practice test
Chapter Practice Exam
Test your knowledge of this chapter with a 30 question practice chapter exam.
Not Taken
Practice Final Exam
Test your knowledge of the entire course with a 50 question practice final exam.
Not Taken

### Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.