Question

If there is only one interest rate, why do we see multiple interest rates in the real world? Please type for me. Thank you.

Answer 1

Multiple interest rates are used in the real world as they involve different incites at various levels of investment.

The chief advantage of knowing the difference between nominal, real and effective rates is that it allows consumers to make better decisions about their loans and investments. For example, a loan with frequent compounding periods will be more expensive than one that compounds annually. Keeping these differences in mind while shopping for a mortgage. Understanding interest rates also apply to investing. A bond that only pays 1% real rate of interest may not be worth it to an investor if they seek to grow their assets over time. These rates effectively reveal the truth return that will be posted by a fixed income investment and the true cost of borrowing for an individual or business.