Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Calculating interest rates on a yearly basis
If the maturity is different from one year, the interest rate is usually recalculated to a corresponding one year rate. For example, consider a bond which matures in six months, has a nominal amount of 25,000 and a current price of 24,200 (no coupons). The six month interest rate is then 800/24,200 = 3.3%. If we want to express this rate as a yearly rate we imagine that we make this investment twice. Our return would then be 1.033.1.033 = 1.067 or 6.7%. Note that if the interest rate is fairly low, then the yearly interest rate is approximately two times the six month interest rate. In the same way, the monthly interest rate is approximately one twelfth of the yearly interest rate.
Keep in mind that the six month interest rate, recalculated to a yearly rate, will typically not be equal to the one year interest rate. For example, suppose that we expect interest rates to increase. In such a case, the yearly interest rate would be an average of the current six month rate and the six month rate six months from now, which is expected to be higher. Hence, the one year rate would be higher than the current six month rate. In the same way, if we expect interest rates to fall, then shorter interest rates will be higher than longer interest rates.
Define the Natural rate of unemployment Natural rate of unemployment is defined as the sum of rates of structural, frictional, and classical unemployment (excluding cyclical un
Q. What is IS-LM model with inflation? The IS-LM model with inflation The basic assumption We developed IS-LM model with constant wages and prices. We can now exten
What is Monetary base The monetary base is defined as the total value of all currency (banknotes and coins) outside the central bank and commercial banks' (net) reserves with t
critically examine Keynesian theory of employment?
What are the indicators of development? Economic development is a complicated multi-dimensional idea. Preferably each aspect of development needs its own indicator. • Prof
Why is quantitative easing used during liquidity trap when it lowers interest rates too?
Q. Explain about Interest rate? When you borrow money, you normally have to pay a fee for the loan. This fee is frequently known as interest, especially if the fee is proportio
Explain the facts or economics rate Boom: The period leading up to the peak of the cycle when an overheating economy is experiencing high GDP growth and inflationary pressures
explain with illustration the meaning of credit creation in commercial banks
For an interest rate of 12% per year compounded continuously, find (a) the nominal rate per year, (b) the nominal rate per quarter, (c) the effective rate per quarter, and (d) the
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd