How is interest generally expressed?

Interest is generally expressed as a percentage because this allows for a standardized way to represent the cost of borrowing money or the return on investment. When expressed as a percentage, it conveys the relationship between the amount of interest paid or earned and the principal amount over a specific period, typically a year. For example, if a loan has an interest rate of 5%, it indicates that for every $100 borrowed, the borrower will pay $5 in interest over the course of a year. This percentage format enables individuals to easily compare different financial products, such as loans and savings accounts, by using a common metric.

Alternatives like a fixed dollar amount or as a monthly fee would not provide the same clarity, as they do not convey the rate relative to the principal amount. A daily rate is less common and could complicate understanding, as interest is typically calculated over longer periods such as monthly or annually. Thus, expressing interest as a percentage is the most effective and widely accepted method.