The interest rates that borrowers pay and savers receive are closelylinked to what the central bank sets. The US Federal Reserve System (Fed), the Bank of England, and the Bank of Canada, for example, are central banks. The Reserve Bank of Australia, the European Central Bank, and the Ba...
There are a few elements one needs to know in order to completely understand rates. First, it is important to understand the types of interest there are: simple and compound. Simple interest is based purely upon the principal earned. Simple interest is always stated in terms of years or annu...
3. What are interest rate swaps? 4. How interest rate swaps work 5. Uses of interest rate swaps 6. Example of hedging with an interest rate swap 7. Types of interest rate swaps 3 key takeaways Interest rate swaps allow parties to exchange interest payment obligations, helping them...
What are Interest-Rate Derivatives? An interest-rate derivative is a financial contract whose value depends on the movement of interest rates. In simpler terms, it is a tool used by investors and businesses to manage and mitigate their exposure to fluctuations in interest rates. These derivatives ...
A simple definition of “interest rate” is the cost of borrowing money. When interest is charged on a loan, it means you’ll have to pay back more than you borrowed. But interest rates also apply to your savings — which are, in effect, a loan you’re extending to the bank. When...
In the modern era, interest rates are a key economic indicator and are closely monitored by governments and central banks. Changes in interest rates can have a significant impact on the economy and can influence the availability of credit, inflation, and employment levels. ...
How do mortgage interest rates work? The mortgage interest rate is the percentage that a loan provider charges for borrowing money to buy a home. The number influences your monthly payment amount and the total cost of the loan. Here are some important points: ...
Interest rates can make the difference between a good deal and a great one when it comes to approaching your bank, but what about a fixed interest rate? Explore fixed interest rates right here. Fixed interest rate definition A fixed interest rate is a rate that doesn’t change for the dura...
Fixed-income securities and interest rates are inversely correlated. Therefore, as interest rates rise, prices of fixed-income securities tend to fall. When applied to calculate fixed income securities, interest rate sensitivity is known as the asset'sduration. This is one way to determine how int...
Definition Interest rate futures are a financial derivative contract where the underlying asset is an interest-bearing instrument, typically a government bond. When volatility strikes the bond markets, traders turn to interest rate futures to hedge risks or speculate on where interest rates will head....