Emil company has $4 million in bonds outstanding. during the current year, the applicable market interest rate decreases. The fair value of Emil company's bonds likely will <u>increase.</u>
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<h3><u>Why Do Interest Rates Exist?</u></h3>
The fee that a lender assesses on a borrower is known as the interest rate, which is expressed as a percentage of the principal, or the loaned amount. Usually, the annual percentage rate (APR), which is how loans' interest rates are expressed, is indicated (APR).
Also subject to interest rates are earnings from savings accounts and certificates of deposit held by banks and credit unions (CD). Interest earned on these bank accounts is referred to as annual percentage yield (APY).
<u>How Are Interest Rates Set?</u>
The economy is just one of the many variables that affect the interest rates that banks charge. Each bank bases its range of APRs on the interest rate, which is established by the central bank of the nation (in the U.S., this would be the Federal Reserve).
Debt becomes more expensive when the central bank sets interest rates at a high level. When borrowing is expensive, people are less likely to do it, which lowers demand from consumers. Moreover, interest rates typically increase along with inflation.
Learn more about interest rates with the help of the given link:
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