What is meant by the term 'term' in finance?

The term 'term' in finance primarily refers to the total duration of a loan or investment, encompassing the length of time over which the loan must be repaid or the investment is held. This duration is crucial for determining the repayment schedule, interest calculation, and the overall maturity date of the financial product.

When considering loan agreements, the 'term' dictates how long borrowers have to fulfill their obligations, influencing both the payment structure and the total interest paid over time. For investments, understanding the term helps investors assess liquidity, risk, and yield over the designated period.

The other options such as the specific interest rate, the timing of when an interest rate comes into effect, or a grace period for repayments do not capture the broader concept of 'term' as it relates to the overall duration of financial agreements.