Theory Of Interest Official

: The baseline compensation for the time value of money, often based on government securities.

: Championed by Eugen von Böhm-Bawerk , this theory emphasizes that humans naturally value present goods more than future goods (agio). Interest is the "discount" applied to future satisfaction. Fundamental Mathematical Components Theory of Interest

Different schools of thought provide varying perspectives on why we pay for the use of money: : The baseline compensation for the time value

: Extra compensation for the possibility that the borrower may default. Theory of Interest

: Adjustments to protect the lender’s purchasing power against rising prices.