Question

Briefly discuss the 5 different interest rate levels required by investors in recent periods.

Answer 1

Interest rate is the % rate of the amount taken as a debt from the lender for giving such debt. There are various types of interest rate out of which 5 major Interest rates are as follows-

1) Simple interest - is the most common method of charging interest rate. it is calculated by using a formula which is principal x interest rate x n(time for which loan is given) = Interest amount.

2) Fixed Interest rate - it means that the lender fixes a specific rate of interest on principal debt and the borrower has to repay the loan amount along with such interest,

3) Variable Interest - it is not a fixed rate rather such interest rate fluctuates as per the market condition. so it benefits the borrower as the interest rate may also get decreased .

4) Prime Rate - as the name suggests, it is the interest rate charged from prime borrowers i.e. favoured customes. such interest rate is lower than the actual interest rate.

5) The discount Rate - this is basically an interest rate which is generallly chareged from the financial institutions and it is charged when loan is given for short term period on a discounted interest rate .