Interest Rate Basics

Interest Rate Basics

In this video, Abdulla covers the basic interest rates we are likely to encounter and uses a spreadsheet example.
Overview

Interest exists because money is a valuable asset. Money allows investors to invest and earn a return or yield. If money is lent, investors are denying themselves that opportunity, so access to money belonging to another party has to be paid for. The interest rate is the cost of accessing that money.

Key learning objectives:

  • Why does interest exist?

  • What is simple or nominal interest?

  • What is the periodic rate?

  • What is the effective annual rate?

  • What is the continuously compounded rate?

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Summary
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Expert
Abdulla Javeri

Abdulla Javeri

Abdulla’s career in the financial markets started in 1990 when he entered the trading floor of the London International Financial Futures Exchange, LIFFE, and qualified as a pit trader in equity and equity index options. In 1996, Abdulla became a trainer for regulatory qualifications and then for non-exam courses, primarily covering all major financial products.

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