Interest Rates: Introduction

Companies raise capital in two main ways: debt and equity. In a free economy, capital is allocated through a market system. The -Select-dividend paymentcapital gaininterest rateItem 1 is the price that lenders receive and borrowers pay for debt. There is no single "price"—"prices" on different types of debt vary depending on the borrower's risk, the use of funds borrowed, the collateral used to back the loan, and the length of time the funds are needed.