What are the Determinants of Interest Rate?
The interest rate you will be paying back is one of the vital things to be considered when borrowing money. The interest rate is the money you pay to your lender for the money lent to you. You can equate it to a fee; you will not have access to this money again. However, there is something more to it. The Federal Reserve Discount Interest Rate determines it; this rate however, has nothing to do with the borrower. It is completely not within your control. There are things involved in money lending by banks and other financial institutions. The lenders themselves borrow the money they advance to borrowers as loan from Federal Reserve banks. The interest rate the lending institution pays the Federal Reserve Bank for a short-term loan is the discount rate. The directors for the Federal Reserve Banks are responsible for working out the rate. As the Fed directors increase or decrease interest so as to regulate the economy, virtually every loan ultimately reflect these changes. There is a dir
