The proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage. The interest rate is typically determined by a combination of market forces and monetary policy.
Questions tagged [interest-rate]
479 questions
9
votes
2 answers
Why is 10% the necessary upper bound for a negative interest rate?
Source: p 710, Economics, 3 Ed, 2014, by N G Mankiw, M P Taylor
... In that same article, Professor Mankiw recounted a
discussion with one of his graduate students at Harvard about a scheme, put forward by the student,
whereby the central bank…
user4020
9
votes
2 answers
How can nominal interest rates be negative?
It used to be (and perhaps still is) standard to teach in economics classes that the nominal interest rate cannot possibly be negative. So why have some nominal interest rates gone negative?
This includes not just interest rates on electronic…
user18
9
votes
4 answers
Are low interest rates dangerous?
Interest rates keep dropping. In my country in northern Europe we now have negative interest rate - banks have to pay the central bank for lending it their money.
I have two questions:
Why are interest rates lower than any time ever before?
Are low…
cvr
- 199
- 2
6
votes
2 answers
What is Negative Interest Rate?
I want to know about Negative Interest Rate. What it is? Is it good or bad? How it affects economy and thus general people?
I have been reading these words a lot lately in business news...
Alex Jones
- 161
- 3
5
votes
2 answers
Is fisher equation a definition, identity? Or is it rather a very good estimate
So let us agree that the fisher equation is $1 + i = (1 + r)(1 + \pi).$ Is it a definiton or good estimate. Intuition tells me this make so much sense and almost qualify as an equation that must hold. However, sources online tell me that it is a…
Kun
- 821
- 2
- 11
- 27
5
votes
3 answers
Why is there a positive risk-free interest rate?
I've been told that the interest rate is the price needed to be willing to take on the risk associated with lending. This is why personal loans have higher interest rates than bank deposits, for example. So why is there a positive (as opposed to…
Peter
- 81
- 2
4
votes
0 answers
Decreasing Yield Curve: Infer expected future trend?
If the yield curve for zero coupon bonds is decreasing does it mean (in general)
that investors are thinking that country's economy has gloomy future? Or unpredictable?
이종연
- 41
- 1
4
votes
1 answer
Interest Rates and Inflation
According to the Fischer hypothesis, nominal interest rates increase with inflation, so that the underlying real interest rate is preserved.
One might then expect that if a nation A has a higher interest rate than another nation B, then the expected…
Kenshin
- 233
- 1
- 7
4
votes
5 answers
Advanced economies tend to slide down to zero interest rates and stay there. Why?
Advanced economies (e.g., Japan, USA, Europe) tend to slide down to zero interest rates and stay there. Why? Are there any theories which explain this tendency?
Kevin K
- 41
- 1
3
votes
3 answers
Why does raising interest rates work?
Why does the federal raising interest rates actually have an effect on the economy? The typical answer is that it reduces money supply by incentivizing saving and increasing cost of loans.
But couldn't market participants just react by adjusting FX…
user20045
- 31
- 1
3
votes
2 answers
Is the time value of money natural or artificial?
Certainly there is a time value of money: If the nominal interest rate of treasury bonds is 5%, then if one has a choice between receiving a hundred dollar bill now and receiving it a year from now, the better option would be to receive it now.
But…
Craig Feinstein
- 145
- 3
3
votes
1 answer
Why should small open economies avoid interest rate policies?
I've been taught that small economies open to capital flows should avoid manipulating interest rates because increasing interest rates will mean capital inflow which causes currency appreciation. Overall, interest rate policy causes exchange rate…
WilliamKin
- 133
- 2
3
votes
1 answer
LIBOR rates: Are these monthly or yearly interest rates?
If I have, for instance, a Libor security with maturity of one month, with interest rate $r$. Is $r$ the amount to be paid after one month, or is it the annualized interest rate?
(My gut tells me that it is the annual interest rate, but I have not…
Chris tie
- 870
- 1
- 5
- 15
2
votes
0 answers
How do mortgage lenders set interest rates?
I'm trying to understand the factors that determine the interest rates that mortgage lenders offer borrowers. My understanding is that rates are determined based on the lender's cost of funds and the borrower's credit profile. Is there anything…
WebUserLearner
- 143
- 3
2
votes
2 answers
How does buying more of a foreign currency devalue a nation's currency?
If a country wants to devalue their countries, why does buying more of a foreign countries currency devalue their currency?
I was reading the top answer from this question How does a country devalue its currency? and it states that buying more of a…
Christopher U
- 191
- 1
- 13