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
64 views

How to get the effective yield?

I have a system that calculates the effective yield. The problem is what formula does the system used to calculate the effective yield. I am trying to convert the system into a mobile application. I ...
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3answers
146 views

Interest rates and what does “discount” mean?

I was reading an article that says "Interest rates play an essential role in financial markets. Foremost, they represent the rate at which investors discount risk-free as well as risky future cash ...
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2answers
166 views

Why would I open a low-rate 9 month CD instead of a higher rate savings account?

One specific (popular online) bank is offering a 9 month 1.25% CD, while it's savings account is 1.90%. There's no way I see interest rates tumbling in the next nine months, so why should I -- why ...
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2answers
93 views

Residential Mortgage Tilt Effect

The way I understand the mortgage tilt effect is that the lender "prices in" the expected rate of inflation into the contract borrowing rate, so that the lender is compensated in the earlier years of ...
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0answers
84 views

The Fed Lowered Interest Rates, Are they going to buy Bonds?

The Fed just lowered interest rates yesterday by 0.25%. I haven't heard anyone mentioning a resurgence of quantitative easing (QE). Are they buying bonds in order to influence the interest rate? If ...
2
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3answers
75 views

Assuming a mortage dependent on interest rate outlook

Purchasing a home. All-cash deal is feasible. I believe that mortgage rates will be rising in the near future, say doubling in ten years. I do not believe mortgage rates will fall. I believe interest ...
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1answer
40 views

How to create a derivative fixed rate loan?

Just curious. Someone mentioned he can only find variable rate loans, no fixed-rate option (somewhere in Europe). Which I find strange, there has to be some price that makes such an offering viable. ...
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2answers
69 views

Calculating Annuities With Different Compounding period and Interest Period

Can anyone Help me solve this? In July 2010, Mike deposits $100 semiannually into an account compounding quarterly at 7% nominal annual interest for three years. In July 2013, he increases the ...
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7answers
12k views

Can I lend a small amount of my own money to a bank at the federal funds rate?

I have a dollar that I won't be needing tonight, and I hear that banks are in the market for short-term loans. In fact, the present Fed funds rate is higher than the interest rate on any savings ...
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8answers
14k views

What stops you from using fixed income in developing countries? [duplicate]

I was recently visiting a developing country and noticed that their interest rates are very high — ~15% with government bonds promising ~13% annually. I was just thinking, if the bid ask spread for ...
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1answer
97 views

How is Barclays Everyday Saver interest rate calculated

I searched online and they said it's 0.25%-0.30% per year. But since my balance is ever-changing, how do they really calculate the interest? Do they just snapshot your balance on a certain day of a ...
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3answers
250 views

Why would one buy a bond with negative rate? [duplicate]

I see presently that many countries outside the U.S. have negative rate government bonds. So you buy one for $101 and in 5 years you get $100 back (face value). (I picked numbers for simplicity). I ...
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3answers
618 views

Why does the Fed change rates in quarter points rounding?

I have always seen( since 1990s) that the Fed changes( cut/increase) interest rates in quarter point increment /decrements in USA that affect the world bond, stock market and borrowing rates, while I ...
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2answers
284 views

what is the possibility of USA having negative interest rate [closed]

There has been attempt at reducing the interest rates. Apart from, elderly and savers depend on the bank interest and Stock market is driven by interest rates, the true cost of money if becomes ...
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2answers
224 views

Why Do People Continue Using Expensive Payment Services Like Paypal And Western Union [closed]

Paypal - the 'industry standard' for online payments makes this opportunity inaccessible to Africans in most cases. Most, who qualify to be a part of the workforce for some internet companies are not ...
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3answers
187 views

Why does bond price go up with interest rate decrease?

I understand that a decrease in prevailing market interest rate causes a downward pressure on the bond yield and, equivalently, an upward pressure on the bond price. But what if a decrease in interest ...
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1answer
36 views

How to calculate equivalent interest rate of gains with monthly contributions?

I started the year with a known amount of funds in my account and I make regular (assume equal) monthly payments into the account. I know how much my gain/interest for the year is. I believe the ...
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1answer
2k views

Yield on municipal bonds versus treasury

I'm looking right now at the yields in Municipal bonds and Treasury bonds on Bloomberg: https://www.bloomberg.com/markets/rates-bonds/government-bonds/us and I see that yields on Municipal bonds are ...
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5answers
171 views

Definition of compound interest

The textbook by John Hull (9/e) describes "quarterly compounding" on page 80: If the interest rate is measured with annual compounding, the bank’s statement that the interest rate is 10% means ...
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1answer
141 views

Term deposits in Sri Lanka have a high interest rate - what's the catch?

This website here shows a comprehensive comparison of term deposit rates in Sri Lanka. Currently you can get a 12 month term deposit at a rate of 10.75% with an AA+ rated bank. Compare this to ...
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1answer
173 views

Taking a loan with a low interest and putting it into a Savings deposit with High interest [duplicate]

Can I make money from taking out a loan from a country with a low interest rate (such as Switzerland, that has an interest rate for loans from 4.9%) and put it into a fixed savings deposit account in ...
5
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1answer
206 views

Fed funds rate and probability of a recession

From an article today on Investopedia: Bonds Signal up to 60% Chance of Recession Earlier in 2019, the Federal Reserve announced a pause in its program of interest rate hikes, re-energizing the ...
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0answers
42 views

Eurodollars: How many days in 3 month LIBOR?

The CME webpage states that Eurodollar futures settle to 3 month LIBOR: My question is regarding the underlying LIBOR term deposit rate mentioned in the contract spec. Suppose today is Tuesday, Feb ...
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1answer
97 views

What kind of interest rate is used on treasury bills?

Let me use an example. If we say the yield to maturity of 1 month treasury bill is 2.414% now, what exactly does it mean? In actuarial notations, this number can mean effective interest rate (APY), ...
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1answer
374 views

How to get information about LIBID rate?

I can find the information regarding LIBOR rate, for example like in this link, but I can't find anything about LIBID rate even though there are many sites providing the LIBID definition. Can anybody ...
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2answers
199 views

Bonds, interest rates and inflation

I was reading Learn to Earn by Peter Lynch and I came across a paragraph that has confused me to say the least. It is regarding bonds - If you buy a $10,000 ten-year bond and hold it for ten years,...
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1answer
63 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 ...
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1answer
191 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 ...
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1answer
714 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). ...
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5answers
2k 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
70 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
113 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 ...
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2answers
104 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
618 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 ...
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3answers
97 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
244 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 ...
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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 ...
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2answers
383 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
83 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 ...
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1answer
55 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 ...
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1answer
57 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 ...
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1answer
45 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 ...
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3answers
102 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? ...
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2answers
231 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 £...
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2answers
208 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 ...
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1answer
62 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
81 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 ...
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1answer
65 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
75 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 ...
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1answer
80 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 ...