Payment for a loan additional to repayment of the amount borrowed. The rate of interest is the extra payment per unit of the loan, typically calculated as an annual rate. An interest-bearing security yields interest to the holder; some interest-bearing loans are used as money. Interest payments are made by borrowers to lenders. Simple interest means that, where interest is not actually paid out but is added to the principal of a loan each period, the amount added is the same each period. Compound interest means that, again where interest is not paid out to the lender, the amount to be added to the loan each period is the same percentage of the debt already accumulated: compound interest thus includes interest on past interest. Interest rates can be found for loans of any duration, from those repayable on demand to perpetuities. Rates on loans of under five years are usually termed short-term rates, rates on loans from 5 to 15 years’ maturity as medium-term, and rates on loans for over 15 years as long-term rates; but usage is not uniform. Interest rates are commonly quoted in nominal terms. The real interest rate is the nominal interest rate for any period, corrected for the effects of inflation. See also compound interest; rate of interest; simple interest.