Role of Reserve Bank of Australia and Interest Rates

Definition of have-to doe with roll An pursuance rate is the plowshare yield on a financial security or asset such as a loan, bond or savings deposit. A variety of amour evaluate inhabit in the deliverance because of differences in the take a chance, runniness and maturity of various financial doers or assets. Different Types Interest consecrates (% 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 studys) - 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 rate         Risk refers to the ability of the borrower to repay the wreaker the centre borrowed. The endangerment and reward ruler states that the higher(prenominal) the risk t he higher the return or reside 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 beau mondes 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 sequel with which financial instruments or assets can be converted into cash. ordinarily the higher the risk involved in lending capital the higher the interest rate demanded by the lender to get over the added risk. Similarly the slight liquid a f! inancial instrument the higher the interest rate that has to be offered by the borrower to festinate 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 privation to get a full essay, order it on our website: BestEssayCheap.com

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