Role of Reserve Bank of Australia and Interest Rates

Definition of wager site An pursuance rate is the ploughshare yield on a financial security or asset such as a loan, bond or savings deposit. A variety of amour rank outlive in the deliverance because of differences in the take a chance, fluidity and maturity of various financial legal instruments or assets. Different Types Interest valuates (% 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 judge         Risk refers to the ability of the borrower to repay the wreaker the centre borrowed. The endangerment and reward normal states that the higher(prenominal) the ris k the higher the return or invade 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 callers 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 scale with which financial instruments or assets can be converted into cash. ordinarily the higher the risk involved in lending money the higher the interest rate demanded by the lender to mask the added risk. Simil arly the slight liquid a financial instrume! nt the higher the interest rate that has to be offered by the borrower to prepare 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 wishing to get a full essay, order it on our website: OrderCustomPaper.com

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