Interest Rates - Essay Example

Comments (0) Cite this document
Since the beginning of man whence he took interest in trade and commercial transactions we see his initiative in the 'usury' or commonly known as 'Interest' in the course of business dealings. In the early history when money was not introduced, we find the loans were advanced in wheat grains and other crops or other barter goods in shape of loan of for instance100 Kg wheat would be returned on next crop by the debtor 120 Kg…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.9% of users find it useful
Interest Rates
Read TextPreview

Extract of sample
"Interest Rates"

Download file to see previous pages All the monotheistic religions i.e. Judaism, Christianity and Islam looked interest with contempt; where the Judaism and Christianity compromised with its significance as stimulating force for economic prosperity, Islam still treats it as a ' war against God' and practicing Muslims dislike the lending and receiving of interest . In our early history the Greeks were considered as highly civilized nation. Lending money at interest was forbidden by the Greeks. Aristotle whose powerful indictment greatly influenced the later nations condemned the taking of interest in very strong words. He compared money to a barren hen which laid no eggs. According to Aristotle, the object of the use of money was to facilitate exchange, and the fuller satisfactions of human wants. According to him this was the most natural purpose of money; money could not be used as the source of accumulation i.e. to increase at interest. So accumulating money at interest was the most unnatural of all ways of making money. A piece of money cannot beget another piece, and hence it was unjust. Plato too condemned interest. Similarly Roman Empire prohibited the charging of interest, and they were first nation to enact laws for the protection of debtors. Gradually prohibitions against usury began to be renewed in Europe. In England the ban was renewed in 1545, during the reign of Henry VIII. It was only during this period the word usury began to be replaced 'interest'. (Homer 1996)

The Prerequisites to the Rise of Interest Rate:
In the underdeveloped economies the demand for capital is great while the supply is very limited as compared with developed economies. Marginal productivity of capital is very high in developing countries and hence the rate of interest is also high. Some political factors also contribute to high rate of interest in poor countries. As a high risk of bankruptcy is involved the higher rates of interest are claimed by the lending agencies.
Where there are possibilities that capital would earn greater reward for the investor, he will be willing to pay higher rate of interest keeping in view the higher degree of capital productivity and better power of payment of interest. In such situation the rate of interest will rise.
When a loan is required for a longer period the money lender would prefer to advance loans to debtors at higher rate of interest as the money lender/creditor have to part with their cash assets for a long period which involves greater risks than the short term loans.
Increase in trade and business activities creates healthy atmosphere and it also creates demand for capital to greater extent and in such circumstances the expectation of higher rate of interest can not be ignored. The rate of interest will rise due to excessive demand of cash resources.
When the economy is under inflationary pressure, it is indicative of the fact that the higher rate of interest prevails in the economic activities of a country. In such situation the interest rates will also rise

The Nature and Necessity of Interest Rates:
Why should interest be paid at all In the Middle Ages Money ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Interest Rates Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Interest Rates Essay Example | Topics and Well Written Essays - 2000 words. Retrieved from
(Interest Rates Essay Example | Topics and Well Written Essays - 2000 Words)
Interest Rates Essay Example | Topics and Well Written Essays - 2000 Words.
“Interest Rates Essay Example | Topics and Well Written Essays - 2000 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Bond Prices and Interest Rates
if the price of the bond is greater than its par value, than it is said to be offered at a premium. This is because the rates of return being offered by these bonds are greater than the market rates of return; therefore, they are more valuable assets and hence are offered at a premium.
2 Pages(500 words)Essay
Interest Rates Essay
Secondly, lending money is the most risky business because the future is never certain and continuously evolves and hence no one can see the future it is imperative that lenders get compensated for this uncertainty in the form of interest on the money that they are lending.
2 Pages(500 words)Essay
Banking - Interest rates
Interest rate in Japan has been low over the past decade with indication that it will remain low. This paper reports on the effects of the low interest on the Japanese banking sector through discussing advantages and disadvantages of the low rates on banks.
3 Pages(750 words)Essay
Explain The Term Structure Of Interest Rates
For instance, a corporate treasurer is a borrower and he has to choose between short term and long term debt. Investors can be seen as lenders who lend their money by purchasing bonds (which can be either long term or short term) (Brigham and Ehrhardt, 2010).
7 Pages(1750 words)Essay
Term Structure of Interest Rates
The outline looks at this theory and how it does apply to the market. ii. It assumes a comparatively small number of long-term investors. This is to offer premiums to encourage the number of long-term investors ( Gibson, Rajna,
2 Pages(500 words)Essay
Bonds and Interest Rates
A bond is a debt instrument issued by companies or government bodies to borrow money for a fixed period of time. The interest rate, called the coupon rate is fixed close to the prevailing interest rates. Some bonds may offer variable coupon rates. Bonds issued by government bodies and financially strong companies would have lower coupon rates.
2 Pages(500 words)Essay
Interest Rates and the Economy
Finally, we would like to put this notion to rest whether unilaterally decreasing interest rates regardless of the conditions in the country will always aid the economy or whether it has become merely an opt-practiced procedure which doesn't have the effects it was expected to have or he surveyors hoped to attain when they began recording perceptions of market analysts with regards to the topic at hand.
6 Pages(1500 words)Essay
Interest Rates an Exchange Rate
This paper focuses on this model and how it could cost a country billions of money. We focus on the loss incurred by British government in September 1992. During this day the model mislead the decision of the UK government at the time and led to huge loses.
5 Pages(1250 words)Essay
Factors affecting mortgage interest rates
Mortgage financing institutions as a capital market has since.Mortgage is money borrowed as loan from mortgage institutions to finance real property acquisition. It is usually paid back in specified periods, installments and interest rates. There are several factors that affect these mortgage interest rates in any given transaction and they vary from one financial institution to another.
7 Pages(1750 words)Essay
Interest rates & stocks
The current dividend of XYZ Company is $0.80 and ‘Ks’ is the required rate of return of the stock which has already been calculated using CAPM and its value is 14.425%. Growth of XYZ stock
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Interest Rates for FREE!
logo footer
Contact us:
Contact Us Now
FREE Mobile Apps:
  • StudentShare App Store
  • StudentShare Google play
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • Miscellaneous
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us