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Why is a bond with a higher interest rate often considered a higher risk investment?
Wiki User
∙ 9y ago
Bonds with a higher interest rate are often considered a higher risk investment because when interest rates rise, bond prices fall; conversely, when rates decline, bond prices rise. The longer the time to a bond's maturity, the greater its interest rate risk.
Wiki User
∙ 9y ago
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How does interest rates affect your purchasing decisions?
ra Interest rates affect our purchases in a couple different ways. If taking out a loan, then a lower interest rate is obviously preferred to minimize your long term expenditure. If viewing an investment prospectus, the return on investment (ROI) is often represented as an interest rate and a higher value is preferred to maximize your earnings.
How much interest would you make with 5 Million US dollars in the bank?
Depends on the interest rate, how often interest is being compounded, and the length of time that the investment is left in the bank.
Does the more compounding periods per year decreases the total amount of interest you receive over the year?
No. The more often it's compounded, the more interest you receive,and the faster your investment grows.
How much must you invest today to get 40000 interest annually?
That's going to depend on all of the following: -- what interest rate you can find -- how often the interest on the investment is compounded -- how you take your 40,000 annually ... how much and how often during the year. You haven't included any of that information in the question, so no answer is possible.
Taking Advantage of Certificates of Deposit For A Safe Investment?
Certificates of deposit are known best for their investment security. For those who simply want to retain the value of their money against monetary forces such as inflation or the national debt, a bank certificate of deposit is typically the best bet. However, it is often necessary to compare interest rates between bank in order to obtain the highest interest rate for your investment. By learning how to compare CD interest rates, finding the best investment opportunity should be accomplishable.Determine How Long You Want To Invest In A Certificate of DepositWhen it comes to the length of time that you hold a certificate of deposit for, longer is typically better. Banks partially depend on the funds obtained through CDs in order to fund loans. The longer that a bank can depend on your capital being available for their investment purposes, the higher the interest rate they will reward you. On the other hand, interest rates are subject to change depending on the current state of the economy. Plan for this occurrence by utilizing a CD ladder investment strategy. This gives you the advantage of yielding the highest potential interest rate on your capital while having the freedom to collect yearly proceeds from a previous CD to either reinvest in a CD or other investment opportunities.Smaller and Online Institutions Offer Higher Interest RatesAvoid opening a certificate of deposit with a large banking institution. Although these banks tend to have convenient local physical locations, the interest rate they offer their customers on CDs tends to be significantly lower. While investing in these institutions may prevent you from having instant access to your money, this inconvenience more than pays for itself when the higher interest rate is considered. Just remember that if you choose to invest with a bank that is either uninsured by the Federal Deposit Insurance Corporation or outside the United States, you are placing your money at risk if the institution is fraudulent or goes out of business.
What is the difference between interest rate and APY when you are shopping for a certificate of deposit?
APR simply reflects the annual interest rate that is paid on an investment, but doesnÕt take into effect how interest is applied. APY takes into account how often the interest is applied to the balance, which can vary daily to annually.
The concepts of simple interest?
Simple interest is interest that is applied to the original amount for the whole period of the investment or loan. This is unlike compound interest where the interest received on an investment is re-invested, or the interest due on a loan is added to the loan outstanding if unpaid, and so itself gains interest. With simple interest on loans, it is often calculated that borrowing a certain amount for a number of years will be charged at a certain rate for the whole period; then at the end of the period of borrowing the original loan and all the interest are repaid at that moment. However, if monthly repayments are made, then part of the original loan as well as the interest for the month are repaid; this means that not all the loan is borrowed for the whole period and so the real [effective] rate of interest for the period is actually higher than the given rate as that given rate assumes no part of the loan is repaid until the very end.
You want to invest annualy for 30 years and earn interest for an additional 5 years to end up with 2000000 dollars at the end of 35 years so what is your annual payment?
That completely depends on what rate of interest you can expect your investment to earn, and how often you can expect the investment interest to be compounded. The assumed rate of interest has more effect on the final value than even the annual payment has, yet the question ignores it completely.
Determine the per annum interest rate r required for an investment with continuous compound interest to yield an effective rate of 4.25 percent Express your answer as a percent?
We still need to know how often the interest is compounded ... Weekly ? Daily ? Hourly ? What does "continuous" mean ?
What is a good jumbo CD rate to make the investment worthwhile?
A good jumbo CD rate would be over 5% and one must be careful to find out how often the interest will be compounded. Also important is the minimum investment amount that would be required.
What factors affect the home refinance loan rate?
Some of the many factors are: credit score, loan term, loan size, and the type of residence. Obviously, a better credit score is likely to get you a better loan rate. Longer term loans also tend to have a higher interest rate. Larger loans have higher interest rates. The type of residence also impacts the loan rate because some residences are considered more risky than others. For example, a condominium is considered more risky than a single family home. Therefore, a condominium will often have a slightly higher interest rate.
How much would 200 invested at 6 interest compounded annually be worth after 6 years?
Compound Interest = P(1+r/100n)(nt) P = Original Investment r = Interest Rate n = How often the interest is compounded per year t = Number of years Interest = 200(1+6/100)6 = 200(1.06)6 =$283.70
