Interest Rate - Market Interest Rates

Market Interest Rates

There is a market for investments which ultimately includes the money market, bond market, stock market and currency market as well as retail financial institutions like banks.

Exactly how these markets function are sometimes complicated. However, economists generally agree that the interest rates yielded by any investment take into account:

  • The risk-free cost of capital
  • Inflationary expectations
  • The level of risk in the investment
  • The costs of the transaction

This rate incorporates the deferred consumption and alternative investments elements of interest.

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