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Deferred consumption. When money is loaned the lender delays spending the money on Consumption (economics)|consumption goods. Since according to time preference
theory people prefer goods now to goods later, in a free market there will be a positive interest rate.
Inflationary expectations. Most economies generally exhibit inflation, meaning a given amount of money buys fewer goods in the future than it will now. The
borrower needs to compensate the lender for this.
Alternative investments. The lender has a choice between using his money in different investments. If he chooses one, he forgoes the returns from all the others.
Different investments effectively compete for funds.
Risks of investment. There is always a risk that the borrower will go bankrupt, abscond, or otherwise default on the loan. This means that a lender generally
charges a risk premium to ensure that, across his investments, he is compensated for those that fail.
Liquidity preference. People prefer to have their resources available in a form that can immediately be exchanged, rather than a form that takes time or money to
Taxes. Because some of the gains from interest may be subject to taxes, the lender may insist on a higher rate to make up for this loss.