Info 1: Interest growth definition
Info 2: how interest growth works
Info 3: interest growth and bond interest rate
Info 4: Example for interest growth
Quick pick:
Changes in any amount of money that is paid above a loan principal amount are known as interest growth.
Opening information:
Interest growth breaks into two words interest and growth. Interest is charged an amount above the loan principal, growth is the percentage of increase and decrease. Interest growth means an increase or decrease amount of money that the principal charged.
This article provided information about what is interest growth, how interest growth works in the public market, and what is the difference between interest growth and bond interest rate. Finally one brief example about the Interest growth.
Info 1: Interest growth definition
Mr.Nikkil is an investor in stocks and bonds and he has been investing his amount for more than 13 years.
However he has been investing in three types of securities one is in stock, and the other is earned through lending loans from financiers and the earnings also came in the part of bonds. He increased 3% of charged interest for his lending loan over the past 3 years, and his bond interest income has decreased by 4 percentage.
Here the increase and decrease of 3 and 4 percent in the lending loans and bonds are considered interest growth.
Because most people think that an increase in interest rate alone is interest growth indeed decrease in interest payment also came in the section of interest growth.
This same concept would apply to all kinds of securities in the public market, so let’s dive into how this interesting growth involved and impacted all over the market.
Info 2: how interest growth works
Interest growth doesn’t represent any of the specific things and objects instead they are increases and decreases of charges on loan and debt instruments.
That loan are lent by the government banks to financial institutions and debt instruments are known to be a bond.
Suppose the increase or decrease is not about the extra return charges on the loan and debt instruments like bonds which aren’t normally considered as interest and interest growth.
However, interest growth is the one that affects the entire economy and plays a major role in affecting all Corporations to small individual public people.
Before any kind of industry became the public trading Industry, each business had no other choice but to raise more capital for their industry apart from business loans from financial institutions called banks.
Were such all banks must need to adherence to the rules of charging loan interest rates for each loan debt they are providing to any kind of organization, it doesn’t matter if such a bank is government or private.
Whenever the federal government increases the loan interest rate most Industries have a high chance would going bankrupt because when the bank loan amount is huge, such an increase in percentage in interest rate from last year to the current year would drastically lead the company to more money to loan from banks.
At the time big Corporations to small businesses would avoid taking loans, for the reason of increased interest from the initial year to the current year which would affect the general people.
If the federal decreases the interest rate over the past few years, this would lead to huge benefits on the opposite side for business and stock Investors.
Most people confuse the loan interest growth and bond interest rate, so let’s jump into the key difference in it anyway.
Info 3: interest growth and bond interest rate
The bond interest rate is the one which is offered by the Corporations and government to pay their holder it had an agreement to issue their interest rate.
But when comes to interest growth in the debt it does not include the bond interest rate reason each bond issuer industry and ruler had the authority to issue interest payments based on the agreement.
So interest growth is about how much amount of money has grown from the beginning year to the current year not about how much amount money is charged now, to make more sense of the interest growth let’s see one brief example below.
Info 4: Example for interest growth
Say you and your sister are the partners of your own started business, whose main purpose is to manufacture cosmetic products.
However, imagine that your company had a debt worth 12 million dollars with an interest rate of 12 percent from the bank loan. This year the government discounted small business debt by 4 percent on the interest rate.
This leads to paying only 8 percent interest on the whole 12 million dollar loan.
Here the decrease from 12 percent to 8 percent is what is known as a 4 percent decrease in interest growth.