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Questions tagged [interest]

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12 votes
10 answers

Why do people buy high dividend stock?

Dividend payout from stock makes the stock price fall by the same value. It is just rearranging your money instead of getting real interest like in bonds. Then why do some people aim at high dividend ...
HetaXD's user avatar
  • 121
2 votes
3 answers

Central bank use of interest to combat inflation

I continue being puzzled by the interest rate rises being used as a lever to lower inflation in the present climate. If I understand correctly, the rationale of higher interest is to dampen demand ...
Hi There's user avatar
1 vote
1 answer

Simplest explanation of “Why isn’t an asset that produces recurring reliable dividends worth infinite money?”

Let’s say there exists an asset that is known to produce $1 of liquid value annually, indefinitely. In practice, this asset is worth a finite amount of money. However, to a naive intuition one could ...
escapecharacter's user avatar
1 vote
1 answer

Do banks pay interest on the money they create?

A bank takes in \$10 in deposits and makes \$100 in loans, creating \$90 of new money. They pay the depositor interest on the \$10 and earn interest on the $100 loan. It looks to me like they don't ...
SRed's user avatar
  • 11
1 vote
0 answers

Help with Macroeconomics Question: IS-LM Model [closed]

I know this is supposed to be a simple question, but I need to check the answers for it and as it was a past exam question I do not have the results for it.If anyone can help out, that would be ...
Antony Mark's user avatar
0 votes
1 answer

interest rate risk vs duration risk?

Is there a difference between interest rate risk vs duration risk? I feel as though I have heard them used interchangeably but I don't know if there is any distinguishing factor between the two.
EllipticalInitial's user avatar
0 votes
2 answers

Taking a loan to pay another loan with the same interest

I had a discussion with family members about how taking a loan to pay another loan with the same interest is basically wasting money and they didn't agree. To make things clearer, say loan 1 is 100 ...
DrShellyCooper's user avatar
0 votes
1 answer

How to reconcile 1) the International Fisher Effect and 2) rising interest rates leading to currency appreciation?

The International Fisher Effect implies that a currency with a lower nominal interest rate will appreciate against another currency with a higher nominal interest rate. However, in general, a currency ...
aquaplane's user avatar
0 votes
1 answer

Interest rate to discount losses in a guarantee portfolio

The government X issues a guarantee for N years to provide funding for a given economic sector. Then, the bank Y provides funding to companies operating in such economic sector with the guarantee of ...
Nassir Bin's user avatar
0 votes
1 answer

Why does the Fed raise the FFR before reducing bond holdings?

In recent months, the Federal Reserve has been purchasing bonds at a decreasing rate. This is evident in the flattening of the slope of the total assets plot. The Fed's total assets plot... The ...
H2ONaCl's user avatar
  • 941
-2 votes
2 answers

MMT and bond sales

Proponents of Modern Monetary Theory claim that bond sales are unnecessary and only help central banks set interest rates (which should be 0% anyway according to theory) and to provide safe interest-...
Pete Ferguson's user avatar