GUARANTEED INTEREST Meaning and
Definition
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Guaranteed interest refers to the certainty of receiving a predetermined rate of return on an investment or loan, typically provided by financial institutions. It is a contractual agreement where the issuer guarantees a fixed interest rate for a specified period, ensuring the investor or borrower will receive a set amount of interest over time, irrespective of market fluctuations.
In the context of investments, guaranteed interest is often associated with fixed-income securities like bonds, certificates of deposit (CDs), or government securities. These instruments ensure that investors will receive a specified interest rate at regular intervals until the maturity date. The guarantee is typically backed by the issuing entity's ability to honor its financial obligations.
For loans and mortgages, guaranteed interest refers to the borrower's assurance that their interest rate will remain fixed throughout the agreed-upon loan term, regardless of prevailing interest rates in the market. This provides borrowers with predictability in monthly payments and protects them from potential rate increases.
Guaranteed interest can be attractive to risk-averse investors seeking stability and a predictable income stream. However, it is important to note that the guaranteed rate may be lower than potential returns from investments with greater market exposure. Additionally, the guarantee is only as strong as the capability of the issuer to fulfill its obligations, making thorough assessment and due diligence essential before entering into any such agreement.
Common Misspellings for GUARANTEED INTEREST
- fuaranteed interest
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- guaeanteed interest
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Etymology of GUARANTEED INTEREST
The term "guaranteed interest" combines two words: "guaranteed" and "interest".
The word "guaranteed" originates from the Old French word "garantie" and the Latin word "garantia", both of which mean a security or a pledge. It was first used in the English language in the 16th century and refers to a promise or an assurance that something will happen or be done.
The word "interest" has its roots in the Latin word "interest" as well, which means "it concerns" or "it is important". In finance, it refers to the fee paid on borrowed money or the earnings obtained from an investment or savings account.
Therefore, when combined, "guaranteed interest" signifies a certain level of assurance or promise regarding the payment of interest on a financial product or investment.
