Interest Rate

Related BrainMass Solutions

• Expected effective financing rate

  C) equal to the Swiss interest rate. D) less than the Swiss interest rate. E) more than the U.S. interest rate.

• Find the Equivalent Before-tax Interest Rate

  Before-tax interest rate * (1-income tax rate) = After-tax interest rate Before tax interest rate * (1-x) = After-tax interest rate Before-tax interest rate = After-tax interest rate/(1-x) Thus, the investor will demand a minimum of After-tax interest

• This posting addresses nominal and real interest rates.

  The real interest rate is the sum of the nominal interest rate less the rate of inflation. The appropriate rate of inflation is taken out of the total to determine the real interest rate.

• Distinguish Between Stated Rate and Effective Rate

  STATED (NOMINAL) AND EFFECTIVE RATES OF INTEREST Stated interest rate is also called nominal interest rate which is a rate of interest quoted for a year that has not been adjusted for frequency of compounding.

• Five-year forward rate

  118717 Five-Year Forward Rate Using Interest Rate Parity Assume that interest rate parity holds. The U.S. five-year interest rate is 5% annualized, and the Mexican five-year interest rate is 8% annualized.

• Nominal rate and Fisher effect

  This is because the nominal interest rate is: Nominal interest rate=Real interest rate+inflation rate So the interest rate that is asked in the market is the nominal interest rate that includes the inflation factor and when the inflation changes the

• Calculating the forward rate between two currencies

  Interest Rate Parity , equate (1) and (2), we get Forward Rate*1*(1+interest rate in UK)=1*Spot Rate*(1+Interest rate in Japan) Forward Rate=Spot Rate*(1+interest rate in Japan)/(Interest Rate in UK) Solution describes the steps to calculate the

• Exchange rate

  a) interest rate differentials; interest rate differentials b) inflation and interest rate differentials; interest rate differentials c) income and interest rate differentials; inflation differentials d) interest rate differentials

• Calculating the interest rates by using IRP concept

  Spot Rate of Euro=$1.20 Forward Rate of Euro=$1.23 Interest Rate in Foreign country=2.439% Interest Rate in Home country=ih=?

• Calculating effective and nominal interest rates

  What is the effective interest rate if nominal annual interest is 12.68% computed continuously? Nominal rate of interest=r=14.8% Effective rate of interest=e^r-1= 2.71828^12.68%-1=13.519% (e=2.71828) 3.