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Market interest rate |
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Market interest rateRates of interest paid on deposits and other investments, determined by the interaction of the supply of and demand for funds in the money market.Market interest rate Similar MatchesExact interestExact interestInterest paid based on the basis of a 365-day/year schedule by a bank or other financial institution as opposed to a 360-day basis (ordinary interest). Difference can be material when large principal sums of money are involved. Unearned interestUnearned interestInterest that has been received on a loan, but that cannot be treated as a part of earnings yet, because the principal of the loan has not been outstanding long enough. Mortgage interest relief at sourceMortgage interest relief at sourceThe mechanism by which income tax relief was extended to a borrower on the interest paid on the first £30,000 of a mortgage on their main home.The system was known as MIRAS, and was operated by most building societies, banks and insurance companies, who would reduce the amount of interest eligible borrowers had to pay every month, and then claim the tax relief back from the Inland Revenue.The amount of relief available on MIRAS was gradually scaled down to 10% and ended altogether from 6th April 2000. Ordinary interestOrdinary interestInterest based on a 360-day year instead of a 365-day year, resulting in what can be a significant difference. Bond interest yieldBond interest yieldYield calculations on bonds aim to show the return on a gilt or bond as a percentage of either its nominal value or its current price. There are three types of yield calculation that are commonly used:Nominal YieldThis is calculated by dividing the annual income on the bond by its nomina or 'par' value. So the nominal yield on a £100 bond which pays 5% interest per year is 5/100 x 100 = 5%.Current or 'Running Yield'This is calculated by dividing the annual income on the bond by its current market price. So if the market price of the £100 bond dropped to £95, the current yield on the bond at that time would be 5/95 x 100 = 5.36%. Note that as the market price of a bond drops, its yield goes up.Redemption Yield'The Redemption Yield shows what the total return on a bond would be if held to its maturity date. It reflects not only the interest payments a bondholder will receive, but also the gain/loss he will make when it matures. The income element is the same 'current yield' calculation performed above. The gain/loss element is calculated by taking the difference between the current market price and the nominal value of the bond (e.g. in our example 100 - 95 = 5), dividing it by the number of years til maturity (assume 5 years for simplicity, so 5/5 = 1) and then dividing that figure by the current price of the bond (1/95 x 100 = 1.05%) The yield to redemption is the sum of the current yield (5.36%) and the capital yield (1.05%) = 6.41%. Further SuggestionsInterest rate ceilingInterest expense interest cover Interest in Arrears Earnings before interest, taxes, and depreciation (EBITD) Add on Interest Interim interest interest Interest sensitive stock Lessees Interest Interest Cap Earnings before interest and, taxes (EBIT) Interest equalization tax Party in interest Interest only strip (IO) Interest on interest interest rate swap Earnings before interest after taxes (EBIAT) Term structure of interest rates Nominal interest rate Times interest earned ratio insurable interest Covered interest parity Interest rate interest only mortgage |
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