INTEREST RATE
interest rate.The percentage that a borrower of money must pay to the lender in return for the use of the money, usu. expressed as a percentage of the principal payable for a one-year period. — Often shortened to rate. — Also termed rate of interest. [Cases: Interest 27–38. C.J.S. Admiralty
§ 281; Interest and Usury; Consumer Credit §§ 34–41; Mortgages § 166.]
annual percentage rate.The actual cost of borrowing money, expressed in the form of an
annualized interest rate. — Abbr. APR.
bank rate.The rate of interest at which the Federal Reserve lends funds to member banks. contract rate.The interest rate printed on the face of a bond certificate.
coupon rate.The specific interest rate for a coupon bond. — Also termed coupon interest rate. See coupon bond under BOND(3).
discount rate. 1. The interest rate at which a member bank may borrow money from the Federal Reserve. • This rate controls the supply of money available to banks for lending. Cf. rediscount rate. 2. The percentage of a commercial paper’s face value paid by an issuer who sells the instrument to a financial institution. 3. The interest rate used in calculating present value.
effective rate.The actual annual interest rate, which incorporates compounding when
calculating interest, rather than the stated rate or coupon rate.
face rate.See nominal rate. floating rate.A varying interest rate that is tied to a financial index such as the prime rate.
illegal rate.An interest rate higher than the rate allowed by law. See USURY. [Cases: Usury
42. C.J.S. Interest and Usury; Consumer Credit §§ 135–141, 143, 146, 152, 157.]
legal rate. 1. The interest rate imposed as a matter of law when none is provided by contract. [Cases: Interest 31. C.J.S. Interest and Usury; Consumer Credit§ 37.] 2. The maximum interest rate, set by statute, that may be charged on a loan. See legal interest under INTEREST(3). Cf. USURY. [Cases: Usury 42. C.J.S. Interest and Usury; Consumer Credit §§ 135–141, 143, 146,
152, 157.]
lock rate.A mortgage-application interest rate that is established and guaranteed for a
specified period. — Also termed locked-in rate.
nominal rate.The interest rate stated in a loan agreement or on a bond, with no adjustment
made for inflation. — Also termed coupon rate; face rate; stated rate; stated interest rate.
prime rate.The interest rate that a commercial bank holds out as its lowest rate for a short-term loan to its most creditworthy borrowers, usu. large corporations. • This rate, which can vary slightly from bank to bank, often dictates other interest rates for various personal and commercial loans. — Often shortened to prime. — Also termed prime lending rate.
real rate.An interest rate that has been adjusted for inflation over time.
rediscount rate.The interest rate at which a member bank may borrow from the Federal Reserve on a loan secured by commercial paper that has already been resold by the bank.
stated rate.See nominal rate.
variable rate.An interest rate that varies at preset intervals in relation to the current market
rate (usu. the prime rate).
[Blacks Law 8th]