Definition of INTEREST COST

Definition

When we know about interest cost, Firstly, we want to know what it is interest? It is a type of remuneration that borrowers pay to owners in order to utilize their advantages. Generally, it is the cost of acquiring cash or earning cash from stored reserves.

Interest cost is theĀ combined measure of interest a borrower pays on credits. This sum should incorporate any focuses paid to diminish the financing cost on an advance since focuses are essentially prepaid interest. Banks should subtract negative focuses or discounts from the premium cost of a borrower because they are, in fact, discounts on the future premium the borrower will pay.

Brief Explanation

It is one measure of advanced financial aspects. When analyzing advanced choices, it is important to take other variables into account as well. These include bank expenses and credit closing costs, tax reductions, key decreases, and opportunity costs as re-investment rates. If you pay off the advance sooner or choose an advance with a lower loan cost, you can reduce these costs.

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