fee charged for a loan. The cost of borrowing money. The money you
receive if you invest in a stock, bond, or Treasury. The money you receive
when you make a loan.
instance, banks pay interest on CD's (Certificates of Deposit) to attract
investors. The money deposited by the purchaser of the CD (the investor) is used by the
bank to issue direct loans and to make various loan investments.
interest the bank earns on its direct loans and other investments will enable
them to pay the interest promised on the CD, on the promised due date
In other words, the interest the CD holder receives is the
bank's payment for the use of the deposited funds.
The same goes for
Treasury Bills and Bonds, or any financial instrument that carries a sum of
interest at maturity.
Scam: Think of financial instruments as Promissory Notes.
Party A promises to pay Party B such and such an amount on such and such a date,
plus interest. (NOTE: not all financial
instruments are interest-bearing).
swindlers would like you to believe that you can earn say, 300% within a given
period of weeks - anywhere from a month to a year.
order for that kind of percentage to be feasible, figure out how much interest
would have to be charged on the financial instruments involved. Oh yeah -
and let's not forget the percentage that is supposed to be allocated to the
cut to the chase - a mortgage is a financial instrument, a Promissory Note
stating that you promise to repay the bank for the money they forked over to the
original owner of the house in which you now live. For the privilege of
using their money to get your house, you are going to pay the bank a fee -
you imagine a scenario in which you would have to pay 300% on that loan, that
mortgage? I think not.
no different for any other financial instrument. Period.
to the top