INTEREST INCOME Meaning and
Definition
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Interest income refers to the earnings that an individual or entity receives from investments or loans that accrue interest. It is a type of passive income that is derived from the interest payments on funds invested or loans extended.
When an individual or entity deposits money in a savings account, opens a certificate of deposit (CD), invests in bonds, or extends loans, they receive interest income as compensation for allowing the use of their funds by another party. This income is typically calculated as a percentage of the principal amount and is paid periodically, usually monthly, semi-annually, or annually.
The concept of interest income applies to various financial instruments such as bank accounts, time deposits, bonds, mortgages, and loans. It serves as a reward for lending money or committing funds to an investment, compensating the lender or investor for the opportunity cost of utilizing their capital elsewhere.
Interest income is subject to taxation and is usually categorized as taxable income. In many countries, individuals or entities are required to report their interest income to the tax authorities and pay the applicable taxes on that income.
Interest income can be an important source of revenue for individuals, businesses, financial institutions, and investors. It plays a crucial role in the overall financial landscape by incentivizing and facilitating lending and investment activities, contributing to economic growth and stability.
Common Misspellings for INTEREST INCOME
- unterest income
- jnterest income
- knterest income
- onterest income
- 9nterest income
- 8nterest income
- ibterest income
- imterest income
- ijterest income
- ihterest income
- inrerest income
- inferest income
- ingerest income
- inyerest income
- in6erest income
- in5erest income
- intwrest income
- intsrest income
- intdrest income
- intrrest income
Etymology of INTEREST INCOME
The word "interest" has its roots in the Latin word "interest", which means "it is of importance" or "it concerns" in Latin. In the context of finance, "interest" refers to the amount of money earned or paid for the use of borrowed money or the return on an investment.
The word "income" comes from the Old English words "in" (into) and "cumen" (come or arrival), which together mean "the arrival or acquisition of something" or "a coming in of something". In the context of finance, "income" refers to the money received from various sources such as wages, investments, rent, or interest.
Therefore, "interest income" refers to the revenue or earnings generated specifically from the interest received on loans or investments.
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