Definition
Interest rate is the price of borrowing (or return on lending) expressed as a percentage over a time period. Make sure rates are compared on consistent bases (APR vs APY).
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Interest Rate" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., APR to APY Calculator) to sanity-check assumptions.
- Read the related guide (e.g., APR vs APY: how compounding changes the effective rate) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- APR to APY Calculator: Convert APR to APY (and APY to APR) given compounding frequency.
- Loan Payment Calculator: Compute monthly payment, total interest, and total paid for a loan using amortization.
- Real Return (Inflation-adjusted) Calculator: Convert nominal return into real return given an inflation rate (and compare the difference).
- Convertible Note Conversion Calculator: Estimate how a convertible note converts in a priced round with interest plus a valuation cap and/or discount (simplified).
Guides
- APR vs APY: how compounding changes the effective rate: A practical guide to APR vs APY: what each means, how to convert between them, and common comparison mistakes.
- Loan amortization: how monthly payments and total interest work: A practical guide to loan amortization: monthly payment formula, why interest dominates early, and how term and rate affect total interest.
- Real vs nominal return: inflation-adjusted performance: A practical guide to real return: how inflation changes purchasing power and why nominal returns can mislead over long horizons.
- Convertible note: interest, cap/discount, and conversion basics: A practical guide to convertible notes: how interest accrues, how caps and discounts affect conversion price, and common modeling pitfalls.
- Interest expense: definition, formula, and how to calculate: Interest expense explained: what it is, the formula, how to calculate it, and how net interest expense works.