Interest Rates: Nominal and Real
Interest rates are the primary yardstick for measuring how much return lenders will get. However, the stated interest rate on a loan, sometimes called the nominal rate, doesn’t tell the whole story.
Because of inflation, the purchasing power of every dollar lent out to an individual or a business tends to decrease over time. Lenders take this into account by calculating what’s known as the real interest rate.
The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market operations through the Federal Reserve Bank.
A line of credit is an arrangement where a bank offers a maximum loan amount that the borrower can draw upon at any time. The borrower – which can be an individual, business or government entity – has the flexibility to take out as much as they want, up to the maximum amount. Lines of credit have a couple of important advantages.
Learn more about this monetary policy employed by central banks.
Feel like you're drowning in debt? It may be because your loans have gone underwater.
Find out how this method of debt investment is used to finance various levels of government and private companies.
Did you know that inflation is silently eating away at your savings? Learn more about this sneaky financial phenomenon and what causes it.
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