Role of Reserve Bank of Australia and Interest Rates

Definition of vex yard An pursuance rate is the circumstances yield on a financial security or asset such as a loan, bond or savings deposit. A variety of amour range come through in the deliverance because of differences in the take a chance, fluidity and maturity of various financial meanss or assets. Different Types Interest set outs (% per annum) Bank Current Deposit (at call) - 0.00%, June 2005 Cash Rate get - 5.50% (+0.25%), 2nd March 2005 Banks Fixed Deposit Rate $5000 to $100,000 (5 socio-economic classs) - 4.75%, June 2005 Finance companionship Debentures (3 course of instructions) - 5.40%, June 2005 Large Business Overdraft Rate (3 year variable) - 9.10%, June 2005 Small Business Overdraft Rate (3 year variable) - 9.60%, June 2005 The Determinants of Interest evaluate         Risk refers to the ability of the borrower to repay the wreaker the centre borrowed. The endangerment and reward article of belief states that the higher(prenominal ) the risk the higher the return or engage rate. conversely the lower the risk involved the lower the return or interest gainful to the lender. Eg: Debentures are loans to companies approve by keep companys assets whereas company notes are not. Debentures notes wherefore carry lower interest rates than company notes as they are more secure by being backed by company assets.

        Liquidity refers to the brass with which financial instruments or assets can be converted into cash. ordinarily the higher the risk involved in lending monetary resource the higher the interest rate demanded by the l ender to pass across the added risk. Simila! rly the slight liquid a financial instrument the higher the interest rate that has to be offered by the borrower to capture the lender to lend funds. Eg: Government bonds and company debentures and notes - A 1 year governance bond with a 5% interest rate reflects nominal risk and reasonable liquidity since... If you fatality to get a full essay, order it on our website: BestEssayCheap.com

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