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Interest rate

This is the annual rate at which interest accrues on a promissory note or other indebtedness, as long as it is outstanding. The interest rate might be fixed at a certain percentage, or adjustable based on fluctuations in a benchmark interest rate index such as the London Interbank Offered Rate (LIBOR).

Factors that influence the interest rate and whether it is adjustable include factors specific to the underlying risk of the promissory note, including whether it is secured by property, as well as environmental economic factors like the rate of inflation, volatility of the industry of the issuer, and the volatility of the currency of the promissory note.

Generally, promissory notes issued by companies that have a higher risk of default or that operate in a volatile economy have higher and more favorable the interest rate terms that offer a greater return for purchasers willing to bear the risk. That said, interest rates on convertible bridge notes issued by early stage companies are typically relatively low.