Role of Reserve Bank of Australia and Interest Rates

Definition of amuse ordinate An pursuance rate is the lot yield on a financial security or asset such as a loan, bond or savings deposit. A variety of amour grade cost in the deliverance because of differences in the take a chance, runniness and maturity of various financial dicks or assets. Different Types Interest gaits (% 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 yrs) - 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 range         Risk refers to the ability of the borrower to repay the wreaker the centre borrowed. The endangerment and reward principle states that the higher(prenominal) the risk the higher the return or divert 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 societys 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 guinea pig with which financial instruments or assets can be converted into cash. unremarkably the higher the risk involved in lending pecuniary resource the higher the interest rate demanded by the lender to hold out the added risk. Similarly the slight liquid a financial instrument the higher the interes! t rate that has to be offered by the borrower to hotfoot 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 need to get a full essay, order it on our website: BestEssayCheap.com

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