Interest Rates - The Determinants of Interest Rates

4 important questions on Interest Rates - The Determinants of Interest Rates

What do nominal interest rates quote?

The rate at which money will grow if invested for a certain period of time

Why doesn't a positive nominal interest rate always result in a gain in wealth?

Because if the inflation is bigger than the return was, you can't buy the same amount of goods/services

What is the term structure?

The relationship between the duration of a loan and the interest rate. In practice: the relationship that results in higher interest when you save your money for a longer time
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What is a risk-free interest rate?

The interest rate when the risk of not receiving the promised payments is zero

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