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The proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage. The interest rate is typically determined by a combination of market forces and monetary policy.

3 votes

I am given an annual interest on my money. How do I calculate how much interest I earn daily?

You are not considering compound interest. From Wikipedia.: Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. [...] C …
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10 votes

Why is 10% the necessary upper bound for a negative interest rate?

Assuming your home is safe, would you keep your money in a bank that only gave 96% of it back? (-4% interest rate) What if your home has mice which eat exactly 10% of your money? Would you then keep …
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0 votes

Why does the nominal interest rate equal 25% in this problem, instead of 16.4%?

Have you considered that the nominal interest rate is the rate of interest without adjusting for inflation? So repaying \$25 on \$20 comes to an interest of 25%, no inflation adjustment is needed.
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3 votes

Do students for economics study theory about no-money-economies and about no-interest-econom...

In mathematical models of economies (e.g., exchange economies), it is not necessary to include money. Prices do turn up as mathematical constructs ("shadow prices"). Modern economies have money to sim …
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1 vote
Accepted

Uncovered Interest Parity (UIP) condition approximation

From the basic equation you get \begin{eqnarray*} \frac{e^E_{t+1}}{e_{t}} & = & \frac{1+i_t}{1+i^*_t} \\ \\ (1+i^*_t) \cdot e^E_{t+1} & = & (1+i_t) \cdot e_t \\ \\ e^E_{t+1} - e_t & = & i_t \cdot e_t …
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6 votes
Accepted

What is the difference between present value and face value?

Suppose the face value of a bond is $M$ and its interest rate is $\tau$. This means it will pay $\tau \cdot M$ interest every year (other periods are also possible) and at the end of its run (its matu …
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10 votes

What are the causes of negative real interest rates?

If there is inflation, what is your alternative? If you do not lend, your money loses even more of its value. A numerical example: If inflation is 5% and you can lend at 2% nominal interest rate, you …
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1 vote

Do assets without rental income streams appreciate relative to assets with rental income str...

I believe he assumes that there is no arbitrage and also that there are no pricing bubbles. So two assets that have the same price today would have the same net present value. Let $P_t$ denote the pr …
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0 votes

Macroeconomics and equilibrium

You seem to be confusing the concepts of value and money. There are ways of repaying a debt without having any money. I.e. you can pay with assets, such as a painting or your house, etc. as long as th …
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