Interest Rates by Cody Chong https://padlet.com/codyjchong/cv8m3o11jyvr Evaluating Factors that affect interest rates: Cody Chong en-us 2020-03-23 21:31:25 UTC 2025-11-13 18:51:59 UTC hello@padlet.com https://padlet.net/icons/png/2195.png Padlet Objective codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475205033 Today I will be outlining the various factors that affect interest rates, and why interest rates are important to you. This Padlet starts with a some details on the basics of interest rates. As you continue along, it explains in depth some key factors that affect the rates, some important factors that aren't often considered, and then finally how they are relevant in our society today. ]]> 2020-03-25 18:38:11 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475205033 What is an interest rate? (Image) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475207356 1. An interest rate is the percentage amount charged to a borrower, or inversely earned by a lender. Interest is normally calculated based on the remaining value of the loan, and is often expressed as an annual rate. An example of a student earning interest would be when you hold your money in the bank, which is effectively a loan to the bank, the bank then pays you in interest for holding their money with them. On the contrary, if you were to take a small business loan, or if you were to take OSAP, the interest would be the amount you pay on top of the principal amount. 

2. I found this image to be good place to start for reader(s) to understand how fractional reserve banking works.  ]]> 2020-03-25 18:39:34 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475207356 6 Factors on Interest Rates (Article) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475229669 1. This article makes a clear separation between the factors affecting interest rates that are in and out of your control. Some key factors that are in your control are your: credit score, loan amount, and your guarantee. The factors that you can not change on a micro level are supply & demand, inflation, and federal fund rates. 

2. I chose to share this website because I didn't know what the federal fund rates were or how supply and demand affect the interest rates until finding this article, and I hope that one of these six factors affecting rates would be new to the reader(s) as well. ]]> 2020-03-25 18:52:32 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475229669 Bonds vs Interest (Video) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475633736 1. The key point in this video is that bond prices are inversely related to interest rates! When interest rates increase, the expected percentage return on investments are generally higher. Therefore, if money can yield higher return elsewhere, then the value of previously issued bonds then decreases. Inversely, if interest rates were to drop, then the value of previously purchased bonds would then be greater. 

2. I chose to share this video because I've found Khan academy to be a reliable source for economic teachings, and also because it's important for the reader(s) to understand the relationships between different economic signals, such as interest rates and bonds. 

]]> 2020-03-26 01:22:13 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475633736 Interest Rate as a Stimulants (Article) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475644509 1. The US government has recently cut interest rates to stimulate the American economy to help the economy throughout the COVID-19 pandemic. How does this help you ask? Simply put, the less money costs, the more spending and investing takes place. 

All things equal, the public often saves their money and turns their assets into liquidity in times of crisis. The most recent cut in interest rates was made with the goal of counteracting this trend of saving, in order to maintain economic growth. 

2. I chose to share this article because it's important to understand what impact the government can have on our economy, especially in times of crisis. ]]> 2020-03-26 01:40:56 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475644509 Fiscal Deficit (Article) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475661797 1. This article provides an overview of some key factors that affect interest rates, similar to the article above. However, this article provides insight into factors that I didn't know about before. 

This article outlines how fiscal deficit often raises interest rates. The severity of fiscal deficit often causes governments to borrow money. The increase of government money increases the supply of money, and if you've taken a macroeconomics class, you know that price and supply have a direct relationship. So, when governments are running at a deficit, this can cause interest rates to rise. 

2. I chose to share this article because I had no idea that there was a relationship between fiscal expenditure and interest rates. ]]> 2020-03-26 02:11:36 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475661797 Exchange Rates (Article) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475669192 1. This article explains the relationship between interest rates and the value of that currency. However, the article does note that there are many more factors on exchange rates and that interest rates are just a small 'piece of the puzzle'. 

Higher interest rates attract foreign investment. Foreign investment can increase the value of a currency. When the value of a currency increases, compared to the value of other popular currencies, the exchange rate for that current increases. 

2. I chose to share this article because exchange rates are extremely important to Canadians, due to our close relationship with the American dollar. The value of our dollar is extremely important for us because most countries trade against the USD, so the value of our currency can make it difficult or easy to import products depending on the value of our dollar. ]]> 2020-03-26 02:26:08 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475669192 Bank of Canada & Federal Reserve (Video) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475683543 1. The B.O.C. and the Federal Reserve cut interest rates by half a percent at the beginning of March. 

I found it very interesting that one of the speakers in the video mentioned that Canada was wise to lower the interest rates not only to stimulate the economy, but to keep the rates parallel with those of the US. I imagine that a large separation in interest rates between our countries can cause investors to move their money in or out of Canada, depending on how our rates compare to those across the border. 

2. I decided to share this video because it is current news and because it also is predicting that there may be an interest rate cut again, which may be useful information to any of the reader(s) looking to potentially invest. ]]> 2020-03-26 02:53:13 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/475683543 Intro to interest rates (Video) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477111357 1. This video outlines visually the main relationships interest rates share with other economical factors. Some of the key factors Investopia explains are the demand for credit, inflation, the federal funds rate, and buying or selling securities. 

2. I chose to share this video because I found it very useful, as I'm a visual learner. I'm hoping that the reader(s) find this video effective in building a foundational understanding of the main factors affecting interest rates. 

The most valuable piece of information I took from this video is how they visually represent that money flow when the securities are either purchased or sold.
]]> 2020-03-26 18:12:18 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477111357 Real Interest Rates (Video) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477142712 1. Don't forget about inflation! This video explains what a real interest rate is, and how it is calculated.
 
 A real interest rate is the interest rate that a lender will
earn after taking inflation into account. For example, if a lender charges 6% on a loan, but the inflation level expected over the length of the loan is 2%, then the real interest rate, or the interest that the lender will earn is 4%.
If you were to express this as a formula, it would be that real interest = nominal interest (the rate in which you chose to charge) - the inflation rate. 
 
2. I chose to share this concept because it applies to everyone who has a bank account. Keep in mind that when you put money in your bank, you’re truly lending that money to the bank. The bank often pays you a lower percentage for holding your money with them than the rate of inflation, so your money is losing value by sitting in any bank account that offers returns lower than the rate of inflation.   ]]> 2020-03-26 18:29:09 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477142712 Trudeau asks lenders to lower interest Rates! (Image) codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477182532 1. This graphic shows some key details on the amount of credit card debt the average Canadian is in. I chose to share this image because this morning (03/26/2020) P.M. Trudeau asked banks and credit card companies to lower interest rates in order to help our economy in this difficult time. 

2. Some of these numbers were shocking to me, they're much higher than I expected, and although not all of us are experiencing these levels of debt, it's important to understand how the average citizen being this in debt affects our overall economy. ]]> 2020-03-26 18:51:53 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477182532 Most Surprising thing I learned codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477245799 The most surprising thing that I learned in my research is how many factors there are that affect interest rates. I thought I was going to find a short list of factors. However, I quickly learned that interest rates can be swayed by a lot of different societal circumstances. ]]> 2020-03-26 19:33:11 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477245799 Example of relevancy codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477249292 The main example of relevancy I can think of is that interest rates affect the currency exchange. I spend a lot of money in USD, so tracking the value of the Canadian dollar is very important for me, so it's important for me to understand how interest rates can change the value of our dollar. ]]> 2020-03-26 19:35:32 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477249292 Passing on knowledge codyjchong https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477261055 If I were to pass on some knowledge to a family member or friend, it would be that a micro change to our interest rate can affect our economy at a micro scale, which is important to pay attention to as it might effect investment decisions they may make. ]]> 2020-03-26 19:43:25 UTC https://padlet.com/codyjchong/cv8m3o11jyvr/wish/477261055