Business and Personal Finance Dictionary

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• INTEREST RATE
  
  The percentage of the face value of a bond or other debt security that you receive as payment on your investment is the security's interest rate. If you multiply that rate by the face value, you get the annual amount you receive as interest. For example, if you buy a bond with a face value of $1,000 that's paying 6% interest, you'll receive $60 a year. If you pay the face value of the investment, the interest rate will be the same as the yield on your investment. But if you paid either more or less than the face value, the rate and the yield will be different. For example, if you paid $1,100 for a bond with a face value of $1,000 paying 6% interest, you'd receive an annual yield of 5.45% ($60 ÷ $1,100 = .0545, or 5.45%). Similarly, the percentage of the principal you pay on a loan is also called the interest rate.
  
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