Capital - a set of property used for profit [

Interest income- income received by the owner of funds from providing them for a while to other economic entities

The interest rate is determined by the supply of accumulated funds and the demand for borrowed funds. Loan interest is the price paid to the owners of capital for the use of their borrowed money during a certain period. Loan interest is expressed using the interest rate (interest rate) for the year. The interest rate is the amount of money that is required to be paid for the use of one borrowed monetary unit per year. The interest rate is calculated:

where r -- interest rate; R - the annual income of the creditor; K -- sum money capital loaned out.

Nominal interest rate-- interest rate, expressed in monetary units at the current exchange rate, excluding inflation rates. This is the amount of money paid for a unit of borrowed currency for a certain period of time. The nominal rate shows how much the amount that the borrower returns to the lender exceeds the amount received in the form of a loan. Real interest rate-- interest rate, expressed in monetary units, adjusted for inflation. This rate is the main one when making investment decisions.

For example, the nominal interest rate is 10% per annum, and the projected inflation rate is 8% per annum. Then the real interest rate will be: 10 - 8 = 2%.

The following factors influence the interest rate:

• - The discount rate of the Central Bank is the basic refinancing rate that is applied when lending to commercial banks.
• -The level of inflation (otherwise banks will incur losses due to the depreciation of money).
• -Term of the loan - the longer the term, the higher the interest rate.
• -Costs for the formation of loan capital. These costs are made up of deposit interest and a fee for a loan that is obtained from another bank. The more expensive the resources are for the bank, the higher the rate of loan interest.
• - Loan size - usually the interest on large loans should be lower than on small ones, since the costs associated with the loan service are not directly related to its size, and the bank's absolute income on large loans is higher than on small ones.
• - Demand for loans. Usually, an increase in demand for loans causes an increase in interest rates on them. However, in the conditions of competition between credit institutions and the struggle for the expansion of markets, banks cannot abuse this rule. They have the option not to raise interest rates when demand for loans rises in order to attract large quantity customers and gain competitive advantage.
• -Nature of the collateral -The bank must evaluate the quality of the respective form of collateral and set the interest rate based on this data. The higher the quality of the collateral, the lower the interest rate can be.
• -Costs for loan processing and control. The higher these costs, the higher the rate of interest.
• - Rates of banks-competitors.
• - The nature of the relationship between the bank and the borrower. For a regular client whom the bank knows well and trusts, who has a term deposit or a deposit with a low interest rate, the bank can set a discount when determining the amount of interest.
• -Rate of profit from other active operations. If investment operations bring a relatively large income than lending, then the bank should revise its interest rate policy in the direction of raising the level of interest rates.
• - The need to make a profit from lending operations. The rate of loan interest must be higher than the deposit rate. The value of this difference is used to cover bank costs and generate profits.

An important indicator in the evaluation investment projects is the net present value (NPV). It is the difference between the discounted amount of expected returns and the cost of investment, i.e. NPV = PV - C.

Interest as return on capital. nominal and real interest rates.

The concept of "capital" as a resource in economic theory includes in themselves means of production created by people. The use of capital brings income to its owners in the long run. However, in order to receive income from the use of capital, it is necessary to make investments in the current period. Thus, the capital invested in the current period will ensure the growth of production in the future.

The percentage of the marginal, additional product received in the future to the capital invested at the present time is called interest income on capital.

In the real market, capitals circulate in monetary form, therefore, the market of money capitals arises and develops. Money capital is not an economic resource in the sense that money itself does not participate in the production of goods and services. However, real capital is the means of production. To start or increase the production of goods or services, entrepreneurs present an investment demand for real capital. This requires financial opportunities, the availability of money capital. The money can be obtained through a loan, in the form of shares or a saved part of the profits.

In connection with this, there concept of interest rate. Interest is the payment for the use of money capital. Loan interest rate (rate of interest) is the price of using money, the price of money capital

From the point of view of the seller of money-capital, the rate of interest on loans is capital income.

The equilibrium lending rate is determined by the intersection of the money demand line and the money supply line. At the same time, the total demand for money includes the demand for money for transactions and the demand for money on the part of assets (money as a medium of circulation and as savings). Demand is inversely proportional to the rate of interest.

The money supply is regulated monetary policy of the state.

The price of using money is considered not like absolute value but as a percentage of the amount of money. As a result, it is possible to compare the prices of loans of different amounts.

When analyzing the category of interest, it is important to distinguish between nominal and real interest rates. Nominal rate- this is the rate expressed in monetary units at the current rate, excluding inflation. The real rate takes into account the purchasing power of the monetary unit and, at a low inflation rate, is approximately equal to the nominal rate (minus the inflation rate). In conditions of inflation, the purchasing power of the amount received on credit decreases by the end of the term. Therefore, the real interest rate can differ greatly from the nominal one, which is taken into account when making a decision on investing in any objects.

There are different interest rates in the economy at the same time. The following factors influence the interest rate:

1. Degree of risk;
2. Loan terms;
3. Loan amount;
4. Restrictions on the conditions of competition in the money market;
5. Taxation of income.

The role of the interest rate in the economy is due to the fact that it affects the level of investment and the distribution of money and real capital among industries and firms. Comparing interest rates when choosing investment options helps efficient allocation of resources, their use for the implementation of the most profitable projects.

Influencing the level of production of investment goods, the interest rate affects the overall output, employment and prices. In order to regulate output, employment and prices, the monetary authorities seek to influence the interest rate through the money supply. Lowering the interest rate results to the growth of investment and output, and its increase - to the opposite process.

INTRODUCTION 2
1. CAPITAL AND INTEREST INCOME 3
CAPITAL AND ASSOCIATED PRODUCTION 3
RETURN ON CAPITAL 4
TIME PREFERENCE 6
2. MARKET OF LOAN CAPITAL 8
STRUCTURE OF THE MODERN INTERNATIONAL MARKET OF LOAN CAPITALS 11
THE PLACE OF THE INTERNATIONAL MARKET OF LOAN CAPITALS IN THE WORLD CAPITALIST ECONOMY 12
CONCLUSION 19
REFERENCES 20

Introduction

One of the three classical factors of production is capital.
CAPITAL (from French, English capital, from Latin capitalis - main) - in a broad sense - this is everything that can generate income, or resources created by people for the production of goods and services. In a narrower sense, it is a source of income invested in a business, a working source of income in the form of means of production (physical capital). It is customary to distinguish between fixed capital, which is part of the capital involved in production over many cycles, and circulating capital, which participates and is completely spent during one cycle. Money capital is understood as the money with which physical capital is acquired. The term "capital", understood as capital investments of material and monetary resources in the economy, in production, is also called capital investments, or investments.
The financial market (capital market) has very specific features that characterize the features of the supply in this market and require special attention.

1. Capital and interest income

Capital includes all available means of production that are created and created by people: tools, machines, infrastructure, as well as intangible things, for example computer programs. Some part of the capital may take quite tangible forms, for example, mining equipment, stone-working machines, etc. Land reclamation is another form of capital; it includes the production of irrigation works, which increases soil fertility, etc. In addition, the knowledge, skills and experience acquired through practical activities and learning processes are an example human capital one individual or another. Next, we will consider some of the features inherent in all these forms of capital.

Capital and associated production
The main feature inherent in all the considered forms of capital is a kind of agreement, if you like, a deal between the present and the future. Indeed, in order to accumulate a certain initial capital in the future, already today one has to endure the inconvenience associated with the impossibility of immediately using the opportunity cost of this capital in the process of its accumulation. Let's say you're fishing in a pond, but you don't have fishing tackle. Perhaps in a day you will be able to catch a few fish with your hands, providing yourself with a meager dinner. However, there is an alternative that is unpleasant at first glance: go to bed hungry, but weave a net for catching fish in a day. But tomorrow's catch cannot be compared with today's. The price of capital accumulation is similar in real economic life.
This simple story illustrates such an important concept in economics as conjugated production. So the production of cars on a car assembly line requires the attraction of significant capital investments - much larger than assembling a car in a handicraft car workshop. Before the automobile plant releases its first products, it is necessary to attract huge forces and means, labor and material resources. But in the future, the performance of its main conveyor will simply be incomparable with the capabilities of car mechanics in a small workshop. Similarly, the construction of an irrigation canal is a conjugated method of irrigation compared to bringing water to the fields in barrels and buckets. The development of computer software in connection with the computerization of accounting operations requires an investment of effort and money. However, in the long term, these investments will pay off with significant time savings and a reduction in maintenance personnel.

Rate of return on capital
Associated production, as well as production using investment capital, can be represented as a process of transformation of current costs into output in some foreseeable future. In our fishing example, running costs are work time, which could be used for catching fish with your hands, but which is used to make fishing accessories. In this aspect, the use of capital as production costs can be analyzed from the standpoint of the marginal product method.
In Fig.1. a graphical interpretation of a simple two-parameter model is presented, in which output is removed from the sphere of consumption, and is used to create capital oriented towards production costs in future.
In the presented diagram, the abscissa shows the value of capital, measured in comparable physical units (in the example with fishing, this is the size of the network cell). On the y-axis - the result of the use of capital (its return), reduced to a unit of future production, released as a result of today's savings (tomorrow's catch plus the catch that was sacrificed for the sake of making the net).........

Bibliography

1. Textbook on the basics of economic theory. / Ed. Kamaeva V.D. - M.: Vlados, 1994.
2. KV Sanin "International market of loan capital". M.: Finance. - 1996.
3. Banking. Etc. O.I. Lavrushina. M .: Banking and exchange scientific and consulting center, 1992.
4. Beauty. International monetary and financial relations, M.: “Finance and statistics”, 1994.
5. Dolan. E.J. Market. microeconomic model. M. 1996
6. McConnell. K., Bru. S. Economics: principles, problems and politics. M.: Republic. 1992. Vol. 1
7. Modern economy. / Ed. Mamedova O.Yu. Rostov-on-Don, "Phoenix", 1996
8. Edwin J. Dolan “Money, banks and monetary policy” S.-P. 1994
9. Raizberg B.A., Lozovsky L.Sh. Modern economic dictionary. - m.: INFRA-M, 1997.

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Capital market and interest.

Capital is one of the key economic categories. We have already noted that capital- this is a factor of production, represented by all the means of production that people have created in order to produce other goods and services with their help. These include tools, equipment, buildings, structures, etc.

AT economic analysis along with the term “capital”, the concept of “investment” or “investment resources” is used.

The term "capital" is used to refer to capital in materialized form, i.e. embodied in the means of production. Investments are capital not yet materialized, but invested in the means of production.

Consider the process of using capital, which is closely related to the idea of ​​its structure.

In the process of production, the various elements of physical capital behave differently. One part of the capital (buildings, machinery, equipment) functions over a long period of time: from several years to several decades, the other part of the capital (raw materials, materials, electricity, water, etc.) is used once.

Fixed assets- this is that part of productive capital that participates in the production process over several production cycles and transfers its value to created goods in parts.

Each element of fixed capital has legally fixed time service, in accordance with which entrepreneurs accumulate the value transferred to the goods and services produced in the form of depreciation deductions.

revolving funds - this is a part of the capital of a company that participates in one production cycle and completely transfers its value to finished goods.

When selling goods, the money spent on items working capital, are fully returned to the entrepreneur and can be used again to purchase factors of production. The cost of fixed capital does not return so quickly, it takes years, sometimes decades. Consequently, the cost of production includes the entire cost of working capital, and from the main there

Rice. 7.2. Equilibrium in the capital market

only a part of the value calculated on the basis of the entire life of this capital is included.

Fixed capital, embodied in the means of labor, wears out as it is used. There are two forms of wear: physical and moral.

Physical deterioration occurs, firstly, in the process of production itself and, secondly, under the influence of the forces of nature (metal corrosion, destruction of concrete, loss of plastic elasticity). The longer the operating time, the greater the physical depreciation of fixed capital.

Obsolescence- the second form of wear. This decline useful properties fixed capital in the eyes of users compared to what is offered in return. It can be caused by two reasons: 1) due to the creation of similar, but cheaper means of labor; 2) due to the creation of more productive means of labor at the same price.

Funds for the renewal of fixed capital are accumulated in depreciation fund. This fund is formed from depreciation charges, representing the monetary form of the cost of existing fixed assets transferred to products. These fees are included in total amount the company's production costs. Depreciation is, in fact, a source of renewal (simple reproduction) of fixed capital.

Each factor of production brings its own income, which rewards its owner. For capital, this income is interest.

Interest income (percentage) is the return on the capital invested in the business. This income is based on the costs of the alternative use of capital (money always has alternative ways applications, for example, they can be put in a bank, spent on shares, etc.). The amount of interest income is determined by the interest rate, i.e. the price a bank or other borrower must pay to a lender for the use of money over a period of time.

The subjects of demand for capital are businesses, and the subjects of supply are households (they offer sums of money, i.e. their savings).

The demand for capital is the demand for borrowed funds. It can be represented graphically as a curve (Dc), which has a negative slope (Fig. 7.2). The supply of capital is graphically represented by a curve (Sc) with a positive slope. At the point of intersection of these two curves (E) equilibrium is established in the capital market. It corresponds to the equilibrium interest rate (r 0).

The supply of borrowed funds within the market as a whole is directly dependent on the volume of bank deposits, i.e. citizens' savings. The volume of savings is directly determined by the level of interest paid on deposits. The higher it is with other equal conditions, the greater the amount of savings and the greater will be the amount of loan funds offered.

When making capital investments (investments), the time value of money is calculated. Money is invested in the implementation of investment objects today, and the income from investments will be received for the entire period of operation of the object. Capital is nothing but discounted value. This means that any element of wealth that brings its owner a regular income over a long period of time is capital and its value is calculated using discounting.

Discounting - it is a method based on bringing future earnings to their present value. It assumes that future money will be worth less than today's money because of the positive rate of time preference (a higher valuation of "present goods" compared to "future goods").

Kn = K 0 (1 + r)n.

To facilitate the discounting procedure, there are special tables that help you quickly calculate the current value of future income and take correct solution.

Nominal rate is the current market interest rate, excluding inflation. The real rate is the nominal rate adjusted for the expected rate of inflation.

It is the real rate that determines the decision on the expediency (or inexpediency) of investments. For example, if the nominal rate is 40% and the expected inflation rate is 50%, then the real rate will be: 40 - 50 = -10%.

The main factors affecting the level of the loan interest rate are the degree of risk on the loan; the term for which the loan is issued; loan amount; the level of taxation; restrictions on competition in the market.

The loan interest rate determines the level of investment activity. A low interest rate leads to an increase in investment and expansion of production, while a high one, on the contrary, inhibits investment and production.

Thus, the percentage market economy acts as the price of equilibrium in the capital market - a factor of production. For the subject of capital supply, interest acts as income, for the subject of demand - as the costs incurred by the borrower.

The concept “ capital” as a resource in economic theory includes the means of production created by people.

The use of capital brings income to its owners. However, in order to receive income from the use of capital in the future, it is necessary to make investments in the current period. Thus, the capital invested in the current period will ensure the growth of production in the future. The percentage of the marginal, additional product received in the future to the capital invested at the present time is called interest income on capital.

In the real market capitals are circulated in monetary form. In this regard, a market for money capital, or a credit market, arises and develops, in which loans are granted and received.

In this regard, the concept of the loan interest rate arises. The price paid for the use of money in a year is called lending rate, or the rate of interest. Interest is the price of money capital.

The equilibrium rate of interest depends on the demand for and supply of loanable capital.

Making a decision on investments and investments of funds involves comparing a unit of capital at the moment with the income received in the future from this unit of investment.

The amount of money-capital initially invested increases every year in proportion to the rate of interest. The amount to be received per ruble of money capital after a certain number of years, can be determined by compound interest formula:

V t = (1 + r) t ,

where V t is the amount that will be received for 1 p. invested money capital;

t is the time interval, years;

r is the rate of interest in decimal form.

All sum, which can be obtained after a certain number of years, is determined by the following formula:

V t = V p (1 + r) t ,

where Vp — sum of money currently nested.

To determine the amount of money that needs to be invested now in order to receive a certain amount in the future, use:

Distinguish between nominal and real interest rates. Rated is the interest rate calculated based on the current exchange rate of the currency. Real- this is the rate of interest, taking into account the level of inflation, i.e., the increase in the general price level for a given period. The real interest rate is equal to the nominal rate minus the rate of inflation.

Interest rates in commercial banks depend on the following main factors:

• the value of the discount interest rate (refinancing rate) of the Central Bank, at which it lends to commercial banks;
• the degree of risk from granting a loan;
• the urgency of the loan;
• loan amount;
• the amount of taxes on income of creditors;
• inflation rate;
• the degree of monopolization of the loan market.

The influence of these factors on the interest rate should be shown.