Introduction

Chapter 9.3

Section 9.3 introduces some important interest rates and determinants of interest rates. You only have to be able to distinguish between the money market and the bond (or capital) market and provide examples of key interest rates in each market.

Activities

1 Bond-market interest rates are by definition long-term interest rates.

2 The SARB's repo rate is a good example of a bond-market rate.

3 The prime overdraft rate is a money-market rate.

4 Treasury bills are traded in the bond market.

5 Gilts are traded in the bond market (or capital market).

6 The effective rate of interest on a bond is also called the coupon rate.