InterestIn ordinary language, interest refers to the excess amount, which is paid by the borrower above the amount borrowed after a given period of time usually a year to the lender at an agreed percentage. In economics the term interest refers to a return on capital only. Samuelson defines interest as
“The market rate of interest is that percentage return per year which has to be paid on any safe lone of money, which has to be yielded by any safe bond or other type of security, and which has to be earned on the value of any capital asset in any competitive market where are there are no risks or where all risks have already been taken care by special premium payments to protect against risk”.
It therefore can be said that interest in the price of services of capital in the production of wealth.