Real interest rates are dictated by the rate of inflation. Higher inflation rates erode consumers’ purchasing power and the amount of interest earned from investments such as deposits.

Significance of the real interest rate Real interest rates affect your purchasing power. As a simple example, let's say you're considering purchasing a product that costs $103, but you only have $100.

However, our opinions are our own. See how we rate banking products to write unbiased product reviews. Simple interest is the interest applied only to the original amount of money deposited or ...

It can also be the rate paid for money on deposit, as in the case of a certificate of deposit. Interest can be calculated in two ways: simple interest or compound interest. Simple interest is ...

You can compute simple interest by multiplying the principal amount by the annual interest rate and by the number of years for which you invest or borrow money. Simple interest is usually owed on ...