1.Productivitu theory of interest
*introduced by J. B. Clark and F. H. Knight. According to this theory interest arises on account of productivity of capital
2 Time preference theory
* John Rae introduced this theory. Interest rate is reward for preference of time.
3.Classical theory of interest
* propounded by Pigou, Marshall, Walras and Knight. Intererst rate is the reward for productive use of capital which is equal to marginal productivity of physical capital
4.Liquidity preference theory
J.M. Keynes. Interest rate is determined by Demand for money and Supply of money which is exogeneously determined