Interest Rate Future

  

Categories: Bonds, Derivatives

See: Interest Rate. See: Futures. See: Interest Rate Option.

You know that, three years from now, you're going to need to borrow a ton of money to build that damn dam. So you buy an interest rate future, paying 35 basis points on the total of $400 million you'll borrow to lock in today's rates of 3.5%. If rates are the same or go down three years from now, you've wasted the 35 basis points...so think of them like "loan term life insurance."

Why would you even do this? Well, if rates went up to, say, 6%, then your country couldn't build the damn dam at all; the interest would be so expensive you just couldn't afford it. So in paying the vig up front, you guarantee affordability, predictability, and well...jobs for the people who vote for you.

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Finance: What is interest?20 Views

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that's interesting is used? why well because something of interest is something of [man stands in theme park]

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value. right if it's interesting it's valuable to know. yeah that's where the

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notion of interest came from. so financially speaking the thing of value

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you have is your capital- your money- the dough you saved from mowing lawns all

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having to you know mow more lawns. all right well how do you pull off this

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bonds, which conveniently for this video pay interest. well interest is just rent

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on the money you're loaning someone. and when you buy a bond you are the landlord,

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right you're renting out your money to someone else, that is people will pay you

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say 60 bucks a year to rent a thousand dollars from you the rate they're paying [kid rents money from a stand]

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Time Warner and others, well you'd be paid your interest twice a year. that is

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you'd get 30 bucks on June 30th and another 30 bucks just before New Year's

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Eve, just in time to buy a bunch of those obnoxious noisemakers. and you'd collect

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that interest until the bond says it'll pay you back your original amount called

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June 30 2020 collect 30 and then it goes December and during the design it goes I [interest shown on document]

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