A short-term interest rate is the usual measure of the opportunity cost of holding money, but money holders participate in many different markets, so other relative prices may affect real money holdings. Inflation increases market interest rates and thus raises the opportunity cost of holding money...
Under these circumstances, Japan has had a very restricted money market. The market for short-term government securities is negligible; the low, peggedinterest ratemeans that the Bank of Japan is the main buyer and that open-market operations are impossible. Transactions in commercial paper are mi...
Transactions in commercial paper are minimal, being discouraged because they would tend to undermine the structure of interest rates and financial institutions. Only the call money market is well developed. It is restricted to transactions among financial institutions. The interest rate on call money ...
mortgage loans that were structured with balloon payments (unusually large payments that are due at or near the end of a loan period) or adjustable interest rates (rates that remain fixed at relatively low levels for an initial period and float, generally with the federal funds rate, thereafter...
mortgage loans that were structured with balloon payments (unusually large payments that are due at or near the end of a loan period) or adjustable interest rates (rates that remain fixed at relatively low levels for an initial period and float, generally with the federal funds rate, thereafter...
in England, and the Tokyo Interbank Offered Rate, or TIBOR, in Japan) function as important indirect guides to the central bank’s monetary policy. Yet even in this respect the ability of central banks to influence inflation-adjusted interest rates is very limited, especially in the long term...
Treasurys, but you’d need to consider the potential for default and the “recovery rate,” which is how much of the money owed to you (in expected interest payments plus the return of your principal) you’d get if the issuer did default. How to invest in junk bonds If allocating ...
bank, an institution that deals inmoneyand its substitutes and provides other money-related services. In its role as a financial intermediary, a bank accepts deposits and makes loans. It derives aprofitfrom the difference between the costs (including interest payments) of attracting and servicing ...
In addition, bonds frequently may be “called” at the option of the company, so that the corporation can take advantage of declining interest rates by selling new bonds at more favourable terms and using these funds to eliminate older outstanding issues. In order to guarantee the earnings of ...
Using such short-term securities helps reduce the effect that changes in interest rates may have on the bonds and other securities held in the fund, known as duration risk. But even with new regulations to help reduce the risk of money market mutual funds, they can still lose money. In ...