Final answer:
An interest rate is typically an annual percentage rate, representing the cost of borrowing money or the earnings on an investment over a year.
Step-by-step explanation:
An interest rate, unless otherwise specified, is typically an annual percentage rate. This is the rate at which interest is calculated on your deposits or loans on a yearly basis.
For example, when you supply money into a savings account at a bank, the bank pays you interest which is a percentage of your deposits. This is known as the deposit interest rate, and it represents the rate of return on your investment.
Conversely, when you take out a loan, the interest charged on the borrowed money is also expressed as an annual percentage rate. To ensure consumers are not charged excessively high interest rates, there are usury laws that impose an upper limit on the interest rates that lenders can charge.