internal-rate-of-return 3

When I moved to the UK, I was surprised to see mortgages advertised for 4.9%. ICICI Bank's HiSAVE account was offering 5.15% interest on savings. So if I borrowed at 4.9% and invested at 5.15%, I can make money for nothing! The catch, of course, is that the mortgage was 4.9% APR. Annual Percentage Rate is the total interest you pay on the initial amount you borrow, divided by the number of years. This has nothing to do with the Internal Rate of Return, or the regular interest rate we know of. ...

Recently, I was helping a bank define Basel 2 requirements. For every dollar a bank lends, at least 8 cents should come from its own pocket, and the rest from its depositors. But a risky $1 loan may be like a $1.5 loan, whereas a $1 Government loan may be like a $0.5 loan. This is the "risk-weighted asset" (RWA) value. Basel 2 says 8% of risk-weighted assets should come from the bank's pocket. ...

We were working with the financing subsidiary of a conglomerate. They had two divisions that gave loans for buying vehicles (mostly trucks, but also cars). One division used the direct channel. They had direct marketing agents (DMAs) who were paid a commission for getting the contract, and the division collected the monthly installments. The other used the dealer channel. The dealers would get the contract as well as collect the installments. ...