AL econ-interest rate ..Urgent!

In the context of A-level economics in Hong Kong, interest rate is the price one pays for enjoying money now rather than later. For example, if you would like to borrow $1,000 from a bank, and repay the bank in 10 instalments over the next 10 months. You have to pay the bank some interests as the bank gives you $1,000 right away, as versus to you save $100 each month for 10 months.

There is an important assumption behind the above, i.e. money now is more valuable than money in the future (reason: certainty/ no risk, liquidity, etc).

Interest is just like a price. When you buy a toy, you pay according to its price. Only that you're not buying a toy, but immediate money.

When you say "rate of return", interest is just one of the names to represent the power to generate money.

Don't mix up interests with risk. High risk investment does not necessarily give you high return.