Consumerinterestratesinvestors certificatesofdeposit

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: bills the day they arrive High float Paying by check Using credit cards Paying bills on the last day due 14 Interest Rate Components 15 Types of Interest Rates The US Treasury’s cost of borrowing money Treasury bills or T bills (short term) Treasury notes (intermediate term) Treasury bonds or T bonds (long term) All other interest rates are a function of “Treasuries” which are “default” risk free Federal funds rate Sets short term interest rates Corporate and municipal bond rates 16 Types of Interest Rates Consumer interest rates ­ Investors Certificates of deposit Bank rates (checking & savings) Money market rates Savings bonds Consumer interest rates – Borrowers Auto loans Mortgages (fixed, variable, short & long term) Home equity loans Credit cards 17 Interest Rate Terms Basis points represent 1/100th of a percent 100 basis points = 1% (.01) 50 basis points = ½% (.005) 25 basis points = ¼% (.0025) Example: 30 year fixed rate mortgages are currently 245 basis...
View Full Document

Ask a homework question - tutors are online