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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

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1answer
55 views

Bond prices changing due to interest rates

I feel as if I'm missing a fundamental step here. I'm aware that bond prices fall as yields go up; but what makes yields go up? If I had a bond issued in the UK for example, and the base rate went up ...
1
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1answer
113 views

Formula for previous months interest payment and balance - Reverse Amortization

I am trying to resolve an issue I am having where a system calculated incorrect additional payments on a loan for a couple of months, resulting in the new current balance being incorrect. I want to ...
5
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1answer
613 views

Should I take advantage of “interest-free” credit when buying something? [duplicate]

If I buy something like a smartphone or a new PC, when you have these choice: Pay all the cost at the moment. Pay it in 6/12/18 months (with loan but without any interest rate and any extra cost). ...
0
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4answers
236 views

Reasons for not taking loans with negative interest rate

At the moment, negative interest rates sounds totally obscure. Basically, the lender has to pay the borrower for lending money from him?!? If this is the case, why shouldn't I just go out to take ...
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2answers
65 views

Visa balance transfer from one loan company to another

I have a Visa loan with company A that has an interest rate of 10%. Company B is offering to let me transfer my balance with A to them for a 12-month 0% interest rate. I know that company A also ...
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3answers
82 views

What's the interest rate in this example of irregular payments?

Loaned out $10K, with the following payments (like, these are all the payments there will ever be) Period 1 2 3 4 5 6 $0 $0 $0 $0 $26K $4K How would I ...
3
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2answers
94 views

Loan payment strategy: Private vs federal?

I am a young professional trying to determine the most efficient/cost effective method for paying off my student loans and would greatly appreciate any advice. Currently, I have about $170,000 in ...
3
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2answers
131 views

interest compounded daily vs monthly

I want to compare two saving accounts with same APY, but one has interest "compounded daily and credited monthly" and the other has interest "compounded monthly and credited monthly". Which will yield ...
1
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3answers
79 views

How does a bond's coupon rate differ from its market yield rate?

I'm trying to understand how bonds work and am confused by coupon rate vs market yield rate. Suppose company Foo issues a bond with a face value of $1 million, a 4% annual coupon rate payable semi-...
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1answer
122 views

Fed's interest rate vs. effective rate?

I'm trying to understand the "Fed interest rate". Wikipedia says: "Financial institutions are obligated by law to maintain certain levels of reserves... The bank can borrow the requisite funds ...
0
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1answer
44 views

Shortcut for calculating interest rate risk

Is there a rule of thumb to calculating the inverse relation between a bond’s price (or any fixed income payout) and its interest rate? I’m actually more interested in bond ETFs, so something along ...
4
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2answers
354 views

Saving rate higher than the Fed rate: Too good to be true?

Recently I saw this Intrx company advertise a savings account with 2.91% APY on Facebook, and claim it would be FDIC insured up to 100M. They explain their business in the following: We are an ...
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3answers
80 views

Can I make financial/investment decisions just by comparing percentages?

I see a lot of investment and personal finance resources that propose scenarios like the following: if you have a loan for a house with a 5% interest rate and additional income after the minimum ...
1
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1answer
47 views

Annuity vs Bond Returns

The way I understand it buying a simple term annuity from an insurance company is like depositing money in a account that earns fixed interest compounded for the duration of the annuity and taking out ...
0
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1answer
40 views

Interest rate risk of bond that is held to maturity

While reading online about interest rate risk associated with bonds it stated that if an investor plans to hold a bond until its maturity then interest rate risk is insignificant since the final ...
1
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1answer
39 views

Calculating Bond returns as an annual compounded rate

I've been reading up on bonds and the different methods there are of calculating the yield of the bond. So suppose I bought a $1000 face value with a 5% coupon that pays semi annually for $995 with a ...
2
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3answers
83 views

Bonds Yields and Coupon Rate

I read about bonds. Let's say the face value is 1000 rupees and the coupon is 10%. The coupon will be 100 which will be issued at the end of the year if the maturity is one year. Is that correct? ...
0
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2answers
214 views

Are you out of pocket if moving before paying mortgage interest?

Please could somebody clarify the following scenario for me (first time buyer)? Are there any tips? Any differences if moving from one lender to another? Supposing I take out a 25 year mortgage on a £...
0
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2answers
186 views

How are micro-finance banks able to offer interest rates so much higher than traditional banks?

Recently while browsing on google I came to know that there are few small-finance banks which offer great returns with the high amount of interest rate up to 7% and fixed deposits up to 9-9.5%. like ...
2
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1answer
43 views

Selling Interest Rate Swaps

Suppose two parties have entered into an interest rate swap. Would it be possible for one party to sell their portion of the contract to another party? Or would that party have to enter into an ...
2
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1answer
70 views

Understanding effective interest rate and compounding period

An article I'm reading says "An effective monthly rate [on a loan] is quoted over a one-month period. Since it is effective, it is compounded once per month." Is that still true if there's no ...
0
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1answer
41 views

How to compare the APRs of different currencies?

I want to take a loan and I have two options: Euros APR: 7.2% terms: 10 years Yuan APR: 9.2% terms: 5 years I have taken some financial classes so I have a vague idea about it. I know there is an ...
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0answers
45 views

Arbitrage on Libor rate and Swap rate

I must be wrong here, but still want to know where I am wrong. I found the data of Libor rate and swap rate from this link: http://www.interestrateswapstoday.com/libor-rates.html At the time, I read ...
1
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1answer
59 views

Optimizing pay down of multiple loans

Most resources seem to indicate that you want to pay down loans in order of decreasing interest rate. However, I did some manual calculations and found I should be paying down the loans based on the ...
2
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4answers
1k views

minimum repayment on home loan

How to calculate home loan minimum repayments (before taking out the loan). For example, with a credit card, they clearly state, that you need to make X amount as minimum repayment (maybe 10%) with Y%...
2
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0answers
44 views

Is a bank account or branch manager able to give higher interest rates on CDs to preferred clients? [duplicate]

Can an account manager or branch manager of your bank give you higher interest rates on savings or CDs (Certificates of Deposit) if you are a preferred client? For instance, if a long time client who ...
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1answer
47 views

Present value of a sequence of payments doubt

Assuming the nominal interest rate is greater than 0, rank the following three sequences of payments according to their present value: Sequence "A": $90, $100, $110 Sequence "B": $100, $100, $100 ...
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1answer
42 views

How to get my head around FRAs

I'm completely befuddled by FRAs - forward rate agreements. Take a look at this definition ....But, how EXACTLY does that fix an interest rate for me at all? There's nothing in that definition that ...
21
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5answers
8k views

Is it possible to lock in a high interest rate in savings, when general interest rates are high?

I've heard anecdotes about high-interest savings accounts (4.5% around 2006, even 8% in the 80s), that were opened when interest rates (federal funds rate) were high. The implication seemed to be ...
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1answer
54 views

Effect of FED/ECB interest rate on EUR/USD exchange ratio

In 2016, the ECB has lowered interest rate to 0%. Some people assume that within the next few years, the ECB will increase the interest rate. How would that most probably affect the EUR/USD exchange ...
5
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2answers
161 views

Why would anyone go for the shortest term no-penalty CD with lower rate?

Consider below's no-penalty CDs offered by the same bank with the same rules. Why would anyone go for the shortest CD (7 months) if one can get a better rate getting the 13 month CD and close early ...
0
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1answer
59 views

Extension risk with IO bonds

I'm trying to understand the extension risk associated with interest only bonds in a CMO. When rates rise, prepayments drop, and so the life of the IO bonds is extended. This causes the value of the ...
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1answer
136 views

Bond sell off vs stocks

U.S. stocks fell following a bond selloff that sent yields to multi-year highs. New filings for unemployment fell unexpectedly to near 49-year lows. The benchmark 10-year U.S. Treasury yield rose ...
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4answers
320 views

European banks, low interest rates and “free money” for home owners?

Where I live in Scandinavia and across Europe, interest rates are very low. More and more people are using the rising value of their home to draw out money. I would almost call it "free" money when ...
3
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2answers
93 views

Can you use fed interest rates to predict the share price of a bond ETF?

The Fed interest rate is inversely proportional to a bond's value: When the Fed increases interest rates, your bonds lose value. When the Fed decreases interest rates, your bonds gain value. Since ...
5
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4answers
175 views

Is it best to pay back only the minimal compulsory payments for HECS-HELP student loans in Australia?

I have a considerable amount in student loans by Australian standards. I have multiple degrees and they allowed me to get a job that pays well. With such a job, the Australian government requires me ...
2
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5answers
385 views

Why is “low interest rate” an argument for buying property?

I live in California since 2000 and the prices of houses have forever made me felt like it's just beyond my reach to wildly ridiculous. But everybody and their dog has always been adamant that buying ...
0
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1answer
28 views

Optimal interest rate environment for mortgage-backed securities?

When rates rise MBS investors face extension risk and when rates are dropping investors face prepayment risk. If this is true then when is the optimal time to invest in MBS?
2
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2answers
145 views

Question about the Federal Funds Rate

As I understand it, the Fed will set a target for what it wants the Federal Funds Rate to be and then try to achieve this goal through its open market operations. Is the amount of volume that the Fed ...
0
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1answer
104 views

Minimum interest needed to keep money at same value with 4% inflation?

For 30 years, my calculation says 7.17%, which just doesn't seem right. Say you invest $1 each year for 30 years with a return of investment of 7.17% Total investment from your end = $ 3 Total ...
3
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6answers
435 views

Why is it so hard to get a quality loan as an individual?

Currently federal funds rate is 2%, this is about what it should cost for a bank to borrow money from the government. I doubt lending money costs them much more than this. Loans taken by corporations ...
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1answer
197 views

Gold price in my country. Is it a good investment during hyperinflation? [closed]

On Wednesday, expectations of interest rate hikes in the United States limited profits and put pressure on gold. US gold futures for delivery in December 2018 fell to $ 1,211.50 per ounce, pressured ...
0
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1answer
107 views

Credit Card Interest Rates

From what I can see, the going fixed interest rate in the US and Canada with Visa, and MasterCard is about 20%. I almost never see a card with a lower interest rate than this. If I do see one it is a ...
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2answers
554 views

How do I convert a 4% per annum interest rate, compounded semi-annually, to a monthly rate?

Trying to develop a budget model in Excel. I know a prospective savings account makes 4% per annum, compounded semiannual. I'd like to know how much this means it earns monthly. Does it even earn ...
6
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2answers
3k views

If Checking Account's and Saving Account's interest rates are the same, what is the point of having a Savings Account? [duplicate]

In this question I am using Wells Fargo as an example. https://www.wellsfargo.com/savings-cds/consumer-account-rates/ You will see that the interest rate for a checking account is the same as for a ...
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3answers
370 views

Comparison of Mortgage Rate vs 10 Year Treasury Rate

One of the typical reasons mentioned to not pre-pay a mortgage is that the interest is tax deductible and therefore the effective rate on the mortgage is much lower. However, this argument doesn't ...
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1answer
115 views

Rate of return on a loan

If I lend you $100 at, say, 10% annual interest for a 3 year term (36 months), your monthly instalment (usual amortization schedule) should be $3 per month for 36 months, for a total of $116, right? ...
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1answer
92 views

Loan with floating interest [closed]

I have taken a 7 years loan of 450 000 for a car in January 2017 with monthly payment of 7077. The interest rate was 8.25% which means that the total repayment is 593878 after 7 years. As from ...
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4answers
11k views

Does “monthly interest of 1.5% AER” mean that I will get a 1.5% interest every month?

I'll soon be 16 and I'm comparing a few high interest savings / current accounts and this one from Santander UK looks too good to be true, so I think I'm not understanding it right. Santander 1-2-3 ...
3
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1answer
125 views

Interest Rates and compounding periods

How can interest be compounded quarterly but with payments made on a monthly basis? Can you give me an example?