An interest rate is the cost of borrowing money or the return on invested capital, expressed as a percentage of the principal amount. Interest rates are determined by market forces, central bank policies, inflation expectations, credit risk, and supply and demand dynamics in financial markets. Interest rates influence borrowing and lending decisions, investment returns, asset prices, and economic activity, affecting individuals, businesses, governments, and financial institutions. Common types of interest rates include nominal interest rates, real interest rates, annual percentage rates (APRs), and effective interest rates, each serving different purposes in financial transactions. Changes in interest rates impact bond prices, mortgage rates, savings account yields, loan repayments, currency exchange rates, and stock valuations, making them a critical factor in monetary policy, financial planning, and investment decision-making. Understanding interest rates and their implications is essential for managing financial risks, optimizing investment returns, and navigating interest rate-sensitive markets.