What Is a True Interest Cost?

Interest cost refers to the expenses that banks pay depositors in the form of monetary compensation at the agreed deposit interest rate, and is an important part of bank deposit costs. Deposit rates are divided into fixed and floating rates. The fixed interest rate is that the deposit interest rate is calculated at the agreed interest rate and remains unchanged during a certain deposit period. China's deposits are generally calculated at a fixed interest rate; the floating interest rate is the deposit interest rate based on a certain interest rate on the market during a certain deposit period. As a benchmark and floating interest calculation within a certain range. This method of interest calculation is commonly used in Western countries.

Interest cost

Right!

Interest cost refers to the expenses that banks pay depositors in the form of monetary compensation at the agreed deposit interest rate, and is an important part of bank deposit costs. Deposit rates are divided into fixed and floating rates. The fixed interest rate is that the deposit interest rate is calculated at the agreed interest rate and remains unchanged during a certain deposit period. China's deposits are generally calculated at a fixed interest rate; the floating interest rate is the deposit interest rate based on a certain interest rate on the market during a certain deposit period. As a benchmark and floating interest calculation within a certain range. This method of interest calculation is commonly used in Western countries.

Interest method

There are two ways to calculate interest costs: one is to calculate interest at a constant rate; the other is to calculate interest at a variable rate. The former refers to the interest rate calculated by multiplying the interest rate specified at the time of the liability by the balance of the liability. The latter refers to the fact that a specific interest rate is not specified when a liability occurs, but rather a benchmark, which is usually based on a certain rate that is constantly changing in the market (such as the Treasury bill rate), plus or minus a specific amount (0.5% or 1% ) Is the interest rate of the liability.