interest rates

Anonymous

Question Description

Why are there different interest rates on loans and securities? Integrate and expand on the two major premiums that differentiate interest rates: the default premium and the maturity premium. Compare the difference of interest rates in types of loans to reflect different risks and times for repayment. 300 words

Tutor Answer

Ben95
School: Rice University

Attached.

Interest rate outline
1. Causes of different interest rates on loans
2. Premiums differentiating loans
3. Interest rates based on time and risk

Attached.

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Interest rates
The cost that a person incurs when he borrows money is interest rate and it is usually is seen as
compensation to the person who lends out money because lending involves various risks. If there
were no interest rates, many people would not have been motivated to save or borrow as they
both have an opportunity cost. Different types of loans charge interest rates which are different
and the interest rate also keep on changing ...

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