# interest of money

**Definition**  
Interest of money is the compensation paid by a borrower to a lender for the use of capital (money) over time. It is a derivative revenue that must be paid from profit, other income, or by incurring additional debt if profits are insufficient.

**Source Chapter**  
*The Wealth of Nations*, Book 1, Chapter 6.

**Context**  
Smith introduces interest when distinguishing revenue sources, stating that “the revenue derived from labour is called wages; that derived from stock … is called profit; that derived from it … is called the interest or the use of money.”

**Economic Domain**  
Exchange

**Smith’s Original Wording**  
> “The revenue derived from it … is called the interest or the use of money. It is the compensation which the borrower pays to the lender, for the profit which he has an opportunity of making by the use of the money.”

**Modern Interpretation**  
Interest of money corresponds to the modern concept of the cost of capital or the return on lending, fundamental to financial markets, investment decisions, and the time value of money.
