Questions tagged [interest-rate]
a generic tag for question on rate of interest applicable. Ideally should be accompanied by geography tag and other specific subject tags
523
questions
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1answer
18 views
Mismatch Between FV Function and the Bankrate Simple Savings Calculator
I'm trying to replicate the functionality of the Bankrate Simple Savings Calculator in Google Sheets. I've assumed that I need to use the FV function, but I can't get the numbers to match exactly. ...
1
vote
1answer
24 views
How to find CAGR from absolute return in a given duration?
What is the formula to figure out "Compound Annual Growth Rate (CAGR)" from absolute returns?
Say, if 100% is the absolute return in 5 years tenure, then how would I find what is the CAGR ...
0
votes
1answer
35 views
IRR vs Interest rate v loan
Probably a simple answer, but I don't seem to get it.
I've always been taught the IRR is the equivalent of the rate i'd get if I invest the same amount at a bank. (Or the % I need to compare my ...
0
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2answers
67 views
How does risk-free interest rate and interest rate differ on their impact on stock price?
According to investopedia: how interest rates affect stock market,
"Higher interest rates tend to negatively affect earnings and stock
prices (with the exception of the financial sector)."
...
2
votes
3answers
185 views
In theory, what effect should an increase in the national interest rate have on corporate bonds?
The Bank of England is soon to announce if it's going to put its interest rate up or not. I own a lot of UK corporate bonds. Specifically, I have a big investment in one of those unit trusts that ...
4
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3answers
1k views
Finance Test: How to solve for interest rate? (Annuities)
Hello thanks for helping me!
Here's the problem:
You are told that if you invest $11,000 per year for 23 years (all payments made at the end of each year), you will have accumulated $366,000 at the ...
1
vote
2answers
110 views
Finance Exam: Isn't the solution for this problem wrong?
Hey could you help me out, I think the given solution to this problem is wrong:
Find the present value of $3000 due in 5 years and 6 months if the money is worth 4.5% compounded quarterly.
Solution PV ...
5
votes
1answer
210 views
How do you factor in inflation when calculating internal rate of return on an investment?
Say you invest $1000 into a venture on day 1. Then you invest another $1000 on day 365. Then, on day 730, its market value is worth $4000.
If I were to put these numbers into an Excel spreadsheet like:...
0
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1answer
45 views
What are the terms for these interest rate types? [closed]
I'm a beginner, so I don't know the right term for the following interest rates:
The interest rate between the Federal (in US) or Central bank and local banks?
Between banks themselves?
Between ...
1
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0answers
77 views
Why do we have *daily* series of T-bill yields?
I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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3answers
387 views
how many years does S&P take to double your money?
As per rule of 72, if S&P interest rate is 10%, money should double in 7.2 years.
But there are other websites which show different numbers, such as this one says 9.2 years.
I understand inflation ...
0
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1answer
77 views
When should I use EAR (effective annual rate ) and APR (annual percentage rate)
Okay I know that the effective annual interest rate takes into account the effects of compounding, which reflects the real return.
I have 2 word problems:
A firm is considering purchasing or leasing ...
0
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1answer
133 views
Why do business loan interest rates vary that much?
this might be a very basic and stupid question, but I've just recently started considering bank loans for my business (Covid...) and I have no experience with this world whatsoever.
I've noticed that ...
3
votes
2answers
102 views
Disparity in amount recovered opposed to interest rate
I availed a personal loan of 15000 on mobile banking app with a 16% per annum interest rate and 3 EMIs. As per my calculation, the total repayment should be 15,401. However, the bank has debited 15,...
-1
votes
1answer
108 views
How often does the treasury department issue bonds and at what prices?
How often does the u.s treasury department issue bonds and at what prices? Does it issue bonds throughout the year with the same annual yield regardless of current bond prices in the bond market, as ...
0
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2answers
171 views
How can treasury bond ETF increase its value when the FED raises interest rates?
The theory about bonds say that when the interest rates raise, bonds value falls since today's bonds have a higher yield than yesterday's bonds.
However, let's take the 2018-2019 period. The FED ...
0
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2answers
58 views
How does QE reduce long-term interest rates? [closed]
It is said to be that, in a QE programme, the Fed reduces long-term interest rates by purchasing long-term securities. How does this work? Why does buying longer maturity securities from banks reduce ...
0
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2answers
50 views
Is Margin Interest Rate of a Brokerage Relevant?
I've seen brokerages intensely advertise their margin interest rate, and I've seen this being use to compare them. Why is this important, when you can get a low interest rate loan using in the ...
1
vote
2answers
69 views
Impact of rising interest rates on default risk of existing junk bonds?
When interest rates rise, we all know that Math shows that the value of a bond will drop, but that's not my question.
Intuition says that there's an indirect risk, in that rising rates might hurt ...
0
votes
1answer
51 views
Do low interest rates reduce the growth perspectives after IPOs?
My reasoning is this: A company goes public to raise capital at the price of giving up a certain amount of power and control to the shareholders. Now, if someone founds a company and can borrow risk ...
1
vote
1answer
69 views
How are sovereign bond interest rates determined? [closed]
They are a lot of questions about the price of a bond or its yield.
How would bonds fare if interest rates rose?
Why would I not buy a bond for less than face value?
Why invest in long term ...
1
vote
1answer
57 views
How does the continuously compounded interest formula work in terms of months?
The continuously compounded interest formula is:
Pe^rt
Where:
P = Principle
e = 2.718...
r = Annual interest rate
t = time in years
If instead of an annual interest rate, I got a monthly interest ...
4
votes
4answers
1k views
Why are bond ETFs typically recommended for diversifying into bonds?
It seems that the conventional wisdom on portfolio allocation suggests that one should include a bond component in one's portfolio. The usual way that people gain exposure to bonds is by buying a bond ...
2
votes
1answer
115 views
Trying to understand the U.S. yield curve and global inflation
With the COVID crisis the FED has lower interest rates a lot:
Now, inspecting the US yield curve:
It seems to be that this is a normal curve that doesn't flatten too much at the end. Is this correct?...
3
votes
1answer
94 views
Bond ETF vs stocks versus interest rates
I read that:
stocks move in opposite direction of interest rates
bond ETF prices move in opposite directions of interest rates
bond ETF move in opposite direction of stocks
But how can all three of ...
0
votes
1answer
67 views
What is the effect of rising interest rates on a Bond Fund?
For Example:
Assume you purchase $1,000 of a bond fund. If the bond fund has an average duration of 5 years and general interest rates increase 1% , what is the impact on the value of the bond. What ...
14
votes
4answers
4k views
How can bonds reach 0 and negative interest rates? why would someone buy them? [duplicate]
I know what coupon rate and yield to maturity is but I do not understand very well the interest rate of 0.07% in 1 year Treasury bonds, for example. And how can bonds reach 0 and negative interest ...
1
vote
2answers
229 views
cashier check and interest rate
I see news that in Germany banks are asking people to take the money to other banks and need to pay bank negative interest to keep money.
A co-worker pointed a strategy that we can possible use in USA,...
0
votes
1answer
80 views
Is a bunch of debt now better than distributed debt in the future in terms of paying less in the long run?
This might be too theoretical but it popped into my head this concept for attending University/College. If you had the ability to choose one of the following which is best in terms of you paying ...
1
vote
1answer
85 views
Calculate interest rate of mortgage loan that has deferred (suspended) payments
Simple example to illustrate the question:
Suppose I have a 30-year $100,000 mortgage loan at a fixed-rate of 5% interest that I took out exactly 10 years ago. I have been making timely payments each ...
1
vote
1answer
76 views
How is that this UK corporate bond index has gone down during the last month, if the UK interest rates are historically low?
The Bloomberg Barclays GBP Non-Government Float Adjusted Bond has fallen down dramatically during February 2021.
However, the UK interest rates are historically low (font: when will interest rates ...
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2answers
158 views
What formula would I use to calculate the percent of an APR if I knew the payment, principal, and interest?
I'm writing a blog article about potential scenarios in which I might lend someone money and explain how interests work. In my example, I am lending someone $400 and agreed to pay back $100. With no ...
1
vote
1answer
85 views
What are the implications of a steepening yield curve? [closed]
Pretty straightforward question, with, I imagine, very complex answers. I know the yield curve basically impacts the entire financial system, but I am looking to understand its macro-effects. Here are ...
1
vote
1answer
113 views
Should I sell my car, refinance or trade in?
I am in a weird financial situation and wanted some advice.
First of all my wife and I bought a car two years ago for 2,000 over the MSRP and have a higher interest rate about 10%. So in the two years ...
2
votes
2answers
123 views
How to convert annual rate to monthly rate for personal investment?
If we have an annual rate of return of 7% for our stock investment, how much is the monthly rate?
First of all, why might we want to use monthly rate: that's because we may do monthly contribution of $...
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2answers
60 views
Proper way to annualize returns
Searching for "how to annualize interest rates" on Google leads to the following results:
Wikihow's How to Annualize a Percentage
Investopedia's Annualized Rate of Return
Wikihow
...
2
votes
1answer
158 views
Mistake in Investopedia's article on APY?
My question is about James Chen's article on Investopedia, Annual Percentage Yield (APY), last updated on October 17, 2020.
It begins by correctly stating the formula for APY:
APY = (1 + r / n)^n - 1
...
5
votes
1answer
95 views
Why does paying points cost different amounts depending on how much I'm lowering my rate?
I believe I am quite competent with most matters related to personal finance, but one thing I cannot understand no matter how much I Google is paying points on a mortgage. I talked with a mortgage ...
3
votes
2answers
155 views
Logic behind inverse relationship between bond rate and interest rate
I've been reading that there is an inverse relationship between fixed-rate bonds and interest rate. The explanation behind the reasoning is that as interest rates move, the bond has to compete with ...
0
votes
2answers
150 views
IBKR charges different interest rates on margin loans denominated in different currencies. Why not take out the loan in the cheapest one?
For example, the top interest rate for margin loans as of today in AUD is currently set to 1.5%, while for ZAR the interest rate is set to 8.057%. That is a huge difference. If I were in South Africa, ...
17
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9answers
9k views
Is my back-of-the-envelope calculation about taking out a loan to invest into the markets flawed?
With the recent economic struggles due to the Covid-19 pandemic the stock market seems to be even more interesting for personal investments. Taking out a loan might be one of the ways to gather or ...
0
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0answers
25 views
Choosing between a deep discount bond and a loan with variable interest rate
I was wondering what kind of a method should be used to choose between a deep discount bond and a loan with variable interest. Since one option has a fixed rate, and the other has a variable interest ...
0
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1answer
84 views
Refinance Calculator - use Interest Rate or APR?
I am using the NerdWallet Refinance Calculator to compare current loan with new loan.
https://www.nerdwallet.com/mortgages/refinance-calculator/calculate-refinance-savings
My question is should I put ...
0
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1answer
69 views
Why, when U.S treasury yields rise, so do interest rates (on consumer and business loans)?
What causes the consumer / business loans interest's rate to go up whenever the yields on U.S Treasury bonds go up?
1
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1answer
229 views
Formula for calculating the monthly payment for a Personal Contract Purchase
How can I calculate the monthly payment for a PCP (Personal Contract Purchase) when given the variables below?
'Amount to be financed' - finance amount
APR (annual percentage rate - %)
Length of ...
4
votes
1answer
169 views
Can banks charge a lower interest rate for loans than for their fixed term savings account and still make profit?
A friend of mine got a loan of 1,000,000 at an interest rate of 10.6% per year for three years and then deposited that 1 million at 3-year fixed-term non-accessible savings account with a return ...
2
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1answer
107 views
Carry trading using forward contracts
I am curious as to how someone performs a carry trade using forward contracts.
I've read that you go long on the currency that has the higher interest rate but this confuses me. In particular, I've ...
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1answer
56 views
Interest Rate Interpretation
If someone says that the six month interest rate is 5% quoted for an act/360 daycount with semi annual compounding, this means that the amount to pay on a loan of $1 to be repaid in a year is 1.025^2, ...
0
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1answer
101 views
Will a high interest rate consolidation loan improve my score enough to get a low interest rate loan?
As documented elsewhere, I'm paying off debt on credit card accounts totalling roughly 15K and at an average interest rate of roughly 20%
My ultimate goal is to get a loan in the 5-8% range with fixed ...
1
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0answers
41 views
Interest Rate and Present Value Question
I'm trying to answer the hypothetical question posted below (for educational purposes) but I'm very confused about its wording regarding the interest rate. If I assume that the interest is compounded ...