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Fixed Interest
A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments. Variable rate loans, by contrast, are anchored to the prevailing discount window, discount rate. A fixed interest rate is as exactly as it sounds - a specific, fixed interest tied to a loan or a line of credit that must be repaid, along with the principal. A fixed rate is the most common form of interest for consumers, as they are easy to calculate, easy to understand, and stable - both the borrower and the lender know exactly what interest rate obligations are tied to a loan or credit account. For example, consider a loan of $10,000 from a bank to a borrower. Given a fixed interest rate of 5%, the actual cost of the loan, with principal and interest combined, is $10,500.This is the amount that must be paid back by the borrower. A fixed interest rate is based on the lender's assumptions about ...
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Loan
In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money available which could ..., a loan is the lending of money In a 1786 James Gillray caricature, the plentiful money bags handed to King George III are contrasted with the beggar whose legs and arms were amputated, in the left corner">174x174px Money is any item or verifiable record that is generally a ... by one or more individuals, organizations, or other entities to other individuals, organizations etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest In and , interest is payment from a or deposit-taking financial institution to a or depositor of an amount above repayment of the (that is, the amount borrowed), at a particular rate. It is distinct from a which the borrower may pay the len ... ...
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Interest Rate
An interest rate is the amount of interest In and , interest is payment from a or deposit-taking financial institution to a or depositor of an amount above repayment of the (that is, the amount borrowed), at a particular rate. It is distinct from a which the borrower may pay the len ... due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The interest rate is defined as the proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an an ...
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Discount Window
The discount window is an instrument of monetary policy Monetary policy is the policy adopted by the monetary authority In finance and economics, a monetary authority is the entity that manages a country’s currency and money supply, often with the objective of controlling inflation targeting, infla ... (usually controlled by central bank A central bank, reserve bank, or monetary authority is an institution that manages the and of a or formal monetary union, and oversees their . In contrast to a , a central bank possesses a on increasing the . Most central banks also have ...s) that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business Business is the activity of making one's living or making money by producing or buying and selling .. ...
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Forward Curve
The forward curve is a Graph_of_a_function, function graph in finance that defines the prices at which a contract for future delivery or payment can be concluded today. For example, a futures contract forward curve is prices being plotted as a function of the amount of time between now and the expiry date of the futures contract (with the spot price being the price at time zero). The forward curve represents a term structure of prices. Forward interest rate A forward interest rate is a type of interest rate that is specified for a loan that will occur at a specified future date. As with current interest rates, forward interest rates include a term structure which shows the different forward rates offered to loans of different maturities. According to the unbiased expectations hypothesis, forward interest rates predict spot interest rates at the time the loan is actually made, but many analysts dispute whether this is true, as it ignores durational risk. This figure is part of the ...
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Interest Rates
An interest rate is the amount of interest In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money availa ... due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The interest rate is defined as the proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an an ...
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Financial Economics
Financial economics is the branch of economics Economics () is a social science Social science is the Branches of science, branch of science devoted to the study of society, societies and the Social relation, relationships among individuals within those societies. The term was fo ... characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade". William F. Sharpe"Financial Economics", in Its concern is thus the interrelation of financial variables, such as share prices, interest rate An interest rate is the amount of interest In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investm ...s and exchange rates, as opposed to those concerning the real economyThe real economy concerns the production, purchase and flow of goods In econom ...
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