Definition of interest rate risk

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TeachMeFinance.com - explain interest rate risk



interest rate risk -- the risk that a savings association's assets and/or liabilities will decline in market value because of changes in market interest rates . For example, on the asset side, an old loan earning 10 percent will be worth less to the association if interest rates on new loans rise to 12 percent. On the liabilities side, an existing certificate of deposit yielding 10 percent becomes relatively more costly to the association if the interest rate on a comparable new CD drops to 8 percent.



About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".


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