Interest

1. Read the following words and word combinations and

learn their meanings by heart:

a lender	кредитор
percentage	процент
to borrow	позичати
to hoard	накопичувати
surplus funds	надлишкові кошти
an installment	розстрочка, кредит
revolving charge account	обертовий рахунок витрат
a merchant	торговець

2. Read and translate the following text.

Interest is the price paid to the lenders for the use of their money. Interest is calculated as a percentage of the amount borrowed. For example, a borrower in Australia who is charged 12 per cent interest would pay 12 Australian dollars a year in interest for every 100 dollars of the loan. Interest is charged to give lenders of money a return on their investment. This pays them for giving up their right to use the money for a period of time or to make a profit in other ways. In some cases, where there is a risk that the loan might not be repaid, the interest may be very high.

Businesses, governments, and consumers borrow and lend money, and thus they pay and receive interest. Businesses borrow money to buy new machinery or to build new factories. Businesses pay interest out of higher earnings made possible by the borrowed money. At times, one business invests in another and receives interest on its loan. Governments borrow to make up the difference between the money they spend and the funds they collect in taxes. Government pays interest on money it borrows. Consumers pay interest if they borrow to buy a home or a car. When people deposit money in a savings account, they are lending funds to a bank or other financial institution. Therefore, they receive interest.

People or businesses who lend money have incomes that are greater than their expenditures, so they let others use their money. Instead of hoarding their surplus funds, lenders use it to earn more money through interest.

Borrowers are prepared to pay interest so they can make purchases that they could not afford if they had to pay for them immediately. Suppose that a family wishes to buy a house but has not saved enough to pay the entire cost at once. Instead of waiting until the total amount has been saved, the family can take out a mortgage from a bank or another lending institution. The family can then live in the house while repaying the loan in monthly installments. When consumers buy goods or services on credit, they actually are borrowing money by promising to pay by a future date. If the purchase is made on a revolving charge account, the consumer pays in monthly installments and is charged interest on the unpaid balance.

Wise consumers learn about the interest rates they agree to pay. A few merchants may try to make a profit by selling items at low prices but charging a high rate of interest on credit payments. Consumers may pay a higher interest rate for credit from a shop than they would for a loan from a bank.

Exercise 1. Find English equivalents of the following words from

the text and memorize them:

кредитори; процент позиченої кількості; призначати процент; повернення інвестицій; позичати; надавати позику; позика; рахунок заощаджень; накопичення надлишкових коштів; сплатити усю суму відразу; отримати іпотеку; місячна розстрочка; обертовий рахунок витрат; торговець.

Exercise 2. Complete the sentences from the text.

1. Interest is ... . 2. Interest is calculated as a percentage of ... . 3. In some cases, where there is a risk that the loan might not be repaid, the interest may be ... . 4. Businesses, governments, and consumers borrow and lend money, and thus ... . 5. Businesses borrow money to buy ... . 6. Businesses pay interest out of ... . 7. Governments borrow to make up ... . 8. Government pays interest on ... . 9. Consumers pay interest if they ... . 10. When people deposit money in a savings account, they are ... . 11. People or businesses who lend money have ... . 12. Borrowers are prepared to pay interest so they can make ... . 13. When consumers buy goods or services on credit, they actually are ... . 14. If the purchase is made on a revolving charge account, the consumer pays in ... . 15. A few merchants may try to make a profit by selling items at ... .

Exercise 3. Answer the questions:

1. What is interest?

2. Who borrows and lens money?

3. Why do businesses borrow money?

4. Why do governments borrow?

5. When do consumers pay interest?

6. When do people lend funds to a bank?

7. Why is it convenient for a family to borrow money in

a bank, if it wishes to buy a house?

Exercise 4. Speak on the topics:

- interest;

- borrowers and lenders;

Exercise 5. Act out the dialogue on the basis of the following

assignment:

Your friend wants to know something about interest. Speak about borrowers and lenders of money.

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