Glossary
Definition
Interest Rate
The cost of borrowing money, expressed as a percentage.
An interest rate is the percentage charged on borrowed money (for borrowers) or earned on lent money (for lenders). Central banks set benchmark rates that influence all borrowing costs in an economy. Rising interest rates typically reduce stock valuations (by increasing discount rates), while falling rates tend to support higher valuations.
Frequently Asked Questions
How do interest rate changes affect billionaire net worth?
Rising rates typically cause stock prices to fall, which reduces the value of equity stakes. In 2022, rising US interest rates contributed to trillion-dollar declines in the net worth of tech billionaires as their companies' share prices fell.