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http://math.msu.edu/%7eglashow1/Q2_US07.pdf

How do you determine the prime function?
http://math.msu.edu/CurrentStudents/SampleFinals/mth124.pdf

#2
how do you figure out the derivative of the first graph

You need to mark the points where the graph changes slope (as shown in the drawing) from positive to negative and negative to positive. These are the "zeros" and are marked on the x axis. When the slope of the function is negative, the prime function is negative. When the slope is positive the prime function is positive.

In recent years the Fed’s monetary target has been the Fed funds rate. How does the Fed raise or lower that rate and how is that rate related to other rates in the economy such as the prime rate?

The Fed mainly uses open market operations to raise or lower the Fed Funds Rate. If they need to lower the rate, they will buy federal securities (treasury bonds) in the market. This means they credit the buyer with money in exchange for the securities, which means the buyer now has more money on its hands. More money means banks are willing to lend at lower interests rates.

Beside open market operations, the Fed could also adjust the reserve rate for banks, which is the percentage of deposits that banks are required to keep on hand instead of lending. If you lower the requirement, banks are able to lend more, which again lowers interest rates.

One other thing they can do is change the discount rate. This is the interest rate the Federal reserve banks will charge other banks if they need a quick loan in order to meet their reserve requirements. If this rate is low, banks will be a little more willing to lend when they are close to having just enough reserves on hand because they can get a quick loan for not too much. If the rate is high, banks will be cautious and keep extra reserves to make sure they don’t go below the discount rate. So again, the point is how much money is being lent.

The Fed funds rate is the interest rate that banks charge each other for overnight loans. This is usually a very low risk loan for a bank to make. Other rates like prime rate, are higher because they are riskier loan types. The prime rate is what banks will charge their best and most creditworthy customers. Since banks can get money that they need at the Fed funds rate, they are willing to lend to these types of customer for an amount that is the Fed funds rate plus an amount that accounts for the additional risk of these customers, plus some profit.

What would the best plan be? What would the Fed do to the prime rate if it wanted to fight inflation?

Until lending is loosened up, and jobs are created, it really doesn’t matter.

i am a homeowner and i want to refinance to a lower interest rate. i have a penalty if i finance before august 1st of this year. what are the current interest rates and will it be wise for me to wait til july or are they going to rise becaue of the record breaking nasdaq gains? please explain how the stock market influences the rates and any trends that seem to lower or raise rates. what should i be on the lookout for?

it doesn’t. the Fed sets the interest rates, the market responds. if i had to bet, i would bet that the rates will keep going up though, so best to lock in a good rate now.

What is the prime interest rate currently for private student loans? Can someone give me a link?

The current prime rate is 5%…this is not the rate you will get on a student loan unless your loan is tied directly to the prime (most are prime plus). Prime rate is defined as the rate given to a bank’s best customers and is not tied to a specific type of loan.

Hi guys, can you please help me with this clarification. Recently I applied to a loan. They just informed me that they changed to the 3-month London Interbank Offered Rate (“LIBOR”) index instead of the Prime Rate index.
I’m very unsure of what the difference between these two are.
Does this mean a good thing or a bad thing? What are the finace charges for each.

Any sort of info will be of great help, thanks alot!

There are other terms of the loan you need to know about besides the index. But first, in terms of the index you are better off with the Prime Rate. The LIBOR is much more volatile, and that means you could be stuck with a high interest rate for several periods – rates are typically changed every six months.

You also need to know the margin – how much is added to the index to determine your actual interest rate. This is commonly expressed as an interest rate, and you want to have the lowest possible margin. For example, if the prime rate were 4.00% and your margin were 6.00%, your interest would be 10.00%.

You also need to know the caps. These are the maximum percentage increases that can be applied to your interest rate in any time period and the lifetime maximum interest rate. Typical caps are 2% points increase every six months and 6% lifetime caps.

also when a client (AAA Corporation) takes out a loan what does the bank offer: fedfunds rates + spread; libor rates + spread; T bill rates + spread and last what’s prime rate composed of. In short at what price rates do banks get their fund and from where, what rates (names of rates) do they charge other banks and clients.

The federal funds rate is the interest rate at which private depository institutions lend balances (federal funds) at the Federal Reserve to other depository institutions overnight.

London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years.

The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.

country after defeating the white man who used to run that country?
Look, I’m asking a question, not making a statement. I am giving you people an opportunity to show us an example of a Black man proving that the racists were wrong about him

Go read about Chavez.

Didn’t know he was an Afro- Venezuelan, didya?

If a mortgage expert gave me an interest rate based on a good faith estimate, and that interest rate doesn’t match what I have heard (I have extra great credit scores), should I shop around? How can I determine current interest rates? Also, if I have signed initial paper work with a mortgage officer, but not closed on the loan (we are waiting on an appraisal), am I locked in with him, or can I still shop around?
yes, it is a refinance. thank you!

The rate quoted on your initial Good Faith Estimate was the rate available at the pricing quoted on the date the estimate was prepared. Rates change every day, sometimes several times a day. All your mortgage officer and ask what today’s rate is for the saame program. Until you instruct your mortgage officer to lock in the rate you are floatin. It is your choice of when to lock.

Rates will vary from lender to lender and day to day. The most challenging thing for the consumer to discern is whether or not they are comparing apples to apples when rate shopping. Remember, rate is only one component of what makes it the right loan for you. If you pay too much for it, it wasn’t a good deal. Peple who shop solely by rate are being short sighted.

You can change lenders right up until the day the papers record but give your mortgage officer a chance to work with you and get the best structured loan for you.

A Good Faith Estimate is just that, an estimate. It sounds to me like you need to communicate your concerns to your mortgage officer so that you can get enough information to make an informed decision.

when the Federal Reserve sets interest rates, why do banks, etc… have to raise their rates? If someone has great credit score, why can’t a bank offer them a way lower rate? why do they have to follow the fed rate?
doesn’t the bank have its own money to loan out? it does not borrow all of the moey from the fed?

The Federal Reserve Interest Rate is a short term overnight rate which the FED bank charge other bank to borrow funds at. Sometime you can get rate better than the FED rate if you borrow from a Credit Union or go some long term private channel. However since the FED rate is the cost of money for the banks in the short term, the bank usually tack on an additional surcharge to make a profit in making you a loan. So in a sense the FED rate is a measuring stick by which banks use to give you a loan. Ultimately the FED government set the amount of money in circulation so Uncle Sam decides our interest payment.