Interest rates [E-Book].
Paris : OECD Publishing
Finance and Investment
Full Text
Interest can be defined as the price paid by the borrower for the use of funds saved by the lender and the compensation to the lender for deferring expenditures. This compensation comprises two elements, namely a payment equal to the loss of purchasing power of the principal during the term of the loan and a balance that represents the real interest accruing to the lender. However this simplicity does not extend into the area of rate determination since rates vary not only because of inflation, as implied above, but also because of a number of other influences, including: the amount, purpose and period of the transaction; the credit-worthiness of the borrower; the collateral offered and/or other guarantees/guarantors available; the competition for the transaction; government policy. Interest rates are shown as short-term, generally 3 months, and long-term, generally 10 years, with forecast data available for both. For short and long term interest rates, annual and quarterly data are normally averages of monthly figures.