Economic comment Essay

quest ranks are proportionate to credit quality and it shows the ability of the investor to endure at any given circumstance. World economic conditions vary by geography and country and the nature of inflation and deflation influences raise straddles. Interest rate is also de shapeined by the government through its enactment of national policy called interest rate subsidy (Montalbano, 6). Interest rate term structures evidences how they are determined by future expectations of the value money.However in the absences of the aforementioned determinants, interest range are determined by the come forth and demand for bullion. 2. Interest is the premium paid for use of borrowed money. The interest for loans is usually fixed for a certain number of years after which if at that place is delay in containment the interest rate adjusts upwardly all(prenominal) year. The value of dollar bath increase or decrease depending on the picture and demand imbalance.However, lending of mo ney is associated with risks as the lender can not be certain whether or not the borrower will pay the money back. In order for the lender to rationalize the risks, it is important to in effect(p) the loan with a physical property such as certain estate. Additionally, examining of ones ability to pay back the money by use of credit score range can help reduce the risks of lending. 3. Interest rates are also determined by the supply and the demands for funds.This shows that at whatever rate of borrowing, the borrower believes he/she has borrowed at the lowest rate and he/she can even provide higher interest rates on the same funds (Montalbano, 12). On the other hand, the lender believes the funds cannot be lent at a higher rate and on that point is certainty to receive interest and return of principal. Works Cited Montalbano, J. How are interest rates determined? 201. Viewed August 14 2010 from