> Profit and risk must be in balance.

Risk is one factor, but not the only one. The main factor in low-risk investment returns is time preference. In essence: People are willing to pay rent (interest) in exchange for access to money now rather than later. Those with savings can earn a profit by renting out their accumulated savings even in a risk-free scenario where return of principle is 100% guaranteed.

There is no such thing as risk-free renting out your accumulated money.

Nothing in life is completely without risk, but you can get arbitrarily close. Treasury bills are commonly used as an example of an approximately "risk-free" loan since the probability of the federal government repudiating its debts is considered extremely low. Bonds with the lowest investment-grade rating, BBB, have a 1% one-year default rate, with higher grades being significantly less (0% for AAA)[1]. The vast majority of the interest on such a loan is a result of time preference (rent), not risk-taking.

[1] https://corporatefinanceinstitute.com/resources/knowledge/tr...

You know exactly what I meant. 1% does not even cover inflation loses and you still took a risk. This is total nonsense and has nothing to do with the initial conversation.

/thread closed

If what you meant is that interest is fully accounted for by the lender taking the risk that the borrower will default on the loan then what you are saying is nonsense.

While yields over the past year have been rather low at about 2% due to some very unusual circumstances, and T-bill rates are essentially negative at a mere 0.17% nominal yield, US corporate AAA bonds have a long-term average effective yield of over 4%[0] with essentially no chance of default. This is considerably higher than inflation and nearly risk-free to the investor. These corporations could instead have saved up the amount of the payments and had that money at the end of the bond period, but they wanted the money now rather than later, and that is why they're paying you interest.

[0] https://ycharts.com/indicators/us_coporate_aaa_effective_yie...