Nobody downloaded yet

Understanding Base Rates of Interest and Value of Money - Research Proposal Example

Comments (0) Cite this document
The paper "Understanding Base Rates of Interest and Value of Money" highlights that pound of tomorrow will be worth less pound of today. This phenomenon helps understand many financial investment concepts to decide about the most beneficial and rewarding investment. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.6% of users find it useful
Understanding Base Rates of Interest and Value of Money
Read TextPreview

Extract of sample "Understanding Base Rates of Interest and Value of Money"

Download file to see previous pages Banks and institutions talk about the words such as an annuity, mortgage, present value, credit report, bond, stock and hosts of many words of the financial world and you surely know that it is all about money.
In order to understand these words completely, you need to grasp these terminologies in its true sense so that you become capable of taking a decision on your own. In the next few pages, you will sail through the journey of the most fascinating financial world, which when understood fully may help you immensely.
Everyone has heard this word and knows about it. It simply means that money fetches money. The rate at which it fetches is known as interest. The rate is measured in percentage. Surely, higher the rate, larger the benefit flows to you.
Let us understand the difference between actual and nominal interest rate. Supposing your credit card company charges you interest of 2.5% per month. That means that nominal interest per year is 30 per cent; however, the effective interest rate is something else and can be calculated as,
The biggest hurdle that haunts most of the people in life when they start investment is its smallness. Every big thing initially starts small. The time, energy, and efforts put at the beginning do not seem to justify small returns that any business or investment may offer. People get first thought in the mind "For such a small return should I devote my time and spare the money, which otherwise can better be utilized to get more enjoyment in life." Quick answer surfaces, "Sacrifices are manifold compared to the benefits." The thought of this kind wins over the future benefits that may accrue after a few years. Thus, the person tends to postpone a small but a significant beginning, which is capable of transforming his or her fortune.
This issue has to be understood thoroughly before it really happens with you stopping your small beginning for big gains in the future. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(Understanding Base Rates of Interest and Value of Money Research Proposal, n.d.)
Understanding Base Rates of Interest and Value of Money Research Proposal. Retrieved from
(Understanding Base Rates of Interest and Value of Money Research Proposal)
Understanding Base Rates of Interest and Value of Money Research Proposal.
“Understanding Base Rates of Interest and Value of Money Research Proposal”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Understanding Base Rates of Interest and Value of Money

Quantitative Easing - Decreasing Interest Rates

...opportunities instead of allowing credit to local businesses. Therefore, if banks remain reluctant to credit giving regardless of its excessive reserves, there would not be effective circulation of money and this situation may ultimately lead to the failure of the quantitative easing policy. Some of the economists strongly claim that lower interest rates would cause asset bubbles in other economies in a global context although this argument has not attained considerable attention. It is clear that an increase in production in an economy as a result of excessive money supply will directly lead to a subsequent increase in the value of a unit of...
6 Pages(1500 words)Research Paper

Assets and Interest Rates investing the money for a longer period. So the investor will want a higher compensation for assuming the higher risk associated with higher maturity bonds. Therefore, the investor will demand a higher interest rate for a bond that has a larger maturity. 4. Why are the interest rates different for different credit ratings? Explain your answer. Credit rating is “an assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities”. A higher credit rating would...
3 Pages(750 words)Coursework

Banking - Interest rates loses. This means a significant level of instability that could be increasing and threaten the country’s banking sector (International Monetary Fund 9). The low interest rates also affect banks through other industries. Its effects of reduced net interest margin means that higher lending rates is a remedy for increasing revenues from lending and this may mean risky lending to other sectors of the economy. Consequences of such lending such as the recent housing bubble then affect the banking sector as value of property declines. Investors in the industries then default on their loans and the banks are not able to recover their money,...
3 Pages(750 words)Essay

Interest Rates

...The Role of Interest Rates in Contemporary Economies The Origin of Rate of Interest: 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. Such a fixed rate of return was received by the creditor after a year. At the time of...
8 Pages(2000 words)Essay

Interest rates & stocks

...Running Heading: Interest rates & stocks Interest rates & stocks To calculate the return of XYZ stock, Capital Assets Pricing Model (CAPM) is used. The CAPM equation is as follows: Ks = Krf + (Kp* β) According to Bloomberg, the risk free rate or U.S. 10-year Treasury bond rate is 2.125% which is denoted by ‘Krf’ in the above equation. Kp is the market risk premium which is equal to 7.5% and β is the Beta of XYZ stock which is equal to 1.64. By using these values in the CAPM equation, the return of XYZ stock has been calculated and it is equal to 14.425%. To calculate the price of the stock, Constant Growth Model (CGM)...
2 Pages(500 words)Essay

Federal Reserve System, Interest Rates and Money Supply (SLP)

...Impact of Interest Rate Changes Impact of Interest Rate Changes inserts his/her Impact of Interest Rate Changes The paper discusses how the recent changes in interest rates made by the Federal Reserve have affected any consumer buying decisions such as buying a new home, refinancing a home, financing a new car, saving more money in bank, etc. Income is a hybrid of savings and expenditures where savings and expenditures are in inverse relation to each other. Changes in major economic variables have a significant impact on the consumer spending. For example, higher interest rates increase the savings and affects consumer spending. According to Engels Laws, with the rise in income, the percentage of income spent on food decreases... but the...
2 Pages(500 words)Essay

Interest Rate Parity, Exchange Rates

...and vision of the organization; through their understanding of the organization’s mission. Vance (2006) sheds more light on Welch & Welch (2006) work by arguing that employees who are motivated show a great ability of the employees to display to compete on a higher scale unlike employees who are less motivated. Rothbard (2001) just like CIPD (2011a) indicates that, employee engagement puts much emphasis on psychological presence of the employees- mostly attention and absorption of employees. Employees spend a great amount of time thinking on certain tasks, an activity referred to as attention. On the other hand, exerting high levels of force and interest in organization’s tasks is referred to as...
1 Pages(250 words)Essay

Discussion: Interest Rates

...DISCUSSION: INTEREST RATES Lecturer: DISCUSSION: INTEREST RATES Inflation, economic output and savings are three macroeconomic factors that influence interest rate directly. As inflation goes up, banks and other financial institutions raise interest rate to serve as a hedge against depreciation of the quantitative value of money (Brigham & Houston, 2013). Higher economic output and savings are however associated with lower interest rates because they indicate the robustness of the economy, which gives an indication that the quantitative...
1 Pages(250 words)Assignment

The Structure of Interest Rates and Real Interest Rates

...reduced. It is generally identified by the fall in the GDP over a given successive quarters. Based on this, the interest rates tend to be reduced since it impacts on all the businesses (Guttentag & Cagan, 1969). Both small and large ventures tend to fall typically during this period. Ultimately, at such a moment the business borrowers and consumers are the ones who tend to determine the level of interests they are opting to pay for the borrowed money. Ways the government could eliminate the interaction of inflation with the tax system: There is often a greater interaction between the tax systems and interaction. This is due to a major binding factor...
2 Pages(500 words)Coursework

Bonds and Interest Rates

...Bonds and Interest Rates Relationship between 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 generally 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 than weaker or lesser known companies. Bond price and interest rates have an...
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 Research Proposal on topic Understanding Base Rates of Interest and Value of Money for FREE!

Contact Us