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Home > QFINANCE Dictionary > Definition of interest rate effect

Definition of

interest rate effect

Economics

interest rate change leading to increased investment the increase in investment that takes place when companies take advantage of lower interest rates to invest more

interest rate effect - Related Articles

  • Managing Interest Rate Risk

    Best Practice

    Changes in interest rates also affect businesses indirectly, through their effect on the overall business environment. In normal times, for example, construction firms enjoy a rise in business activity when interest rates fall, as investors build more when the cost of projects is lower. Conversely
    By Will Spinney

  • Tools for Measuring Interest Rate Risk

    Best Practice

    the impact of the shift in the reference yield curve on the cash flows of a bond with an embedded option. Thus, the interest rate dependence is incorporated directly into the calculation of P– and P+. Many analysts believe that the duration and effective duration of option-free bonds should always be the same
    By Steven V. Mann

  • Nominal and Real Interest Rates

    Calculations

    When calculating interest rates, the nominal rate of interest refers to an interest rate calculated without any adjustment for inflation or for the full effect of compounding. The real interest rate includes compensation for value lost through inflation, whereas the nominal rate excludes this

  • Interest Rate Risk

    Key Concepts

    Interest rate risk represents the extent to which an asset or investment’s value could be influenced by movements in variable interest rates. Some investments carry greater direct exposure to interest rate risk than others; given their fixed rates of returns, bonds are more exposed to the impact of interest rate movements than equities, with the result than bond prices tend to move inversely relative to interest rates and inflation

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Definitions of ’interest rate effect’ and meaning of ’interest rate effect’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’interest rate effect’ and other financial terms with our online QFINANCE Financial Dictionary.

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