The cost of borrowing money, paid to the lender, is called

The cost of borrowing money, paid to the lender, is called

• A. Taxes
• B. Interest
• C. Salary
• D. Loan

Answer: (B)

Interest is the cost of borrowing money. When you borrow from a lender, they charge interest to earn money for letting you use their funds. It’s usually a percentage of the amount borrowed (the principal) and is paid over time as part of the loan agreement. For example, borrowing $1000 at 5% interest would cost $50 in interest over one year, in addition to paying back the $1000, depending on the terms. Taxes are payments to the government, salary is money earned from work, and a loan is the borrowed money itself, not the charge for borrowing.

Interest is the cost of borrowing money. When you borrow from a lender, they charge interest to earn money for letting you use their funds. It’s usually a percentage of the amount borrowed (the principal) and is paid over time as part of the loan agreement. For example, borrowing $1000 at 5% interest would cost $50 in interest over one year, in addition to paying back the $1000, depending on the terms. Taxes are payments to the government, salary is money earned from work, and a loan is the borrowed money itself, not the charge for borrowing.