Which term describes money paid for the use of borrowed or invested money?

The term that describes money paid for the use of borrowed or invested money is interest. When a borrower takes out a loan or when an investor puts money into a financial instrument expecting a return, interest is the cost of borrowing or the return expected on that investment. It represents the compensation for the risk taken by the lender or the opportunity cost for the investor who could have used that money elsewhere.

Interest can be calculated in various ways, including simple interest, which is calculated on the principal amount, or compound interest, which takes into account interest on both the initial principal and the accumulated interest from previous periods. This distinction is important in the fields of finance and economics, as it impacts the total cost of borrowing and the returns on investments.

Principal refers to the initial amount of money that is either borrowed or invested, which is distinct from the cost of using that money. Dividend refers to a portion of a company's earnings distributed to its shareholders, while yield represents the income return on an investment, such as the interest or dividends received, relative to the investment's cost. Therefore, the correct identification of interest highlights its fundamental role in financial transactions involving borrowed or invested money.