Exercises № 2. Translate the text: Different interest rates (text №2)

The discount rate is the rate that the central bank sets to lend short-term funds to commercial banks. When this rate changes, the commercial banks change their own base rate, the rate they charge their most reliable customers like large corporations. This is the rate from which they calculate all their other deposit and lending rates for savers and borrowers.

Banks make their profits from the difference, known as a margin or spread, between the interest rates they charge borrowers and the rates they pay to depositors. The rate that borrowers pay depends on their creditworthiness, also known as credit standing or credit rating. This is the lender's estimation of a borrower's present and future solvency: their ability to pay debts. The higher the borrower's solvency, the lower the interest rate they pay. Borrowers can usually get a lower interest rate if the loan is guaranteed by securities or other collateral. For example, mortgages for which a house or apartment is collateral are usually cheaper than ordinary bank loans or overdrafts - arrangements to borrow by spending more than is in your bank account. Long-term loans such as mortgages often have floating or variable interest rates that change according to the supply and demand for money.

Exercises № 3. Translate the text: Different interest rates (text №3)

Leasing or hire purchase (HP) agreements have higher interest rates than bank loans and overdrafts. These are when a consumer makes a series of monthly payments to buy durable goods (e.g. a car, furniture). Until the goods are paid for, the buyer is only hiring or renting them, and they belong to the lender. The interest rate is high as there is little security for the lender: the goods could easily become damaged.

Exercises № 4. Work with the glossary.

IBAN - International Bank Account Number (IBAN)

ICPFs - insurance corporations and pension funds (ICPFs)

ICSD - international central securities depository (ICSD)

IFTS - interbank funds transfer system (IFTS)

Interest rate - The ratio, usually expressed as a percentage per annum, of the amount that a debtor has to pay to the creditor over a given period of time to the amount of the principal of the loan, deposit or debt security.

Interest rate future - An exchange-traded forward contract. In such a contract, the purchase or sale of an interest rate instrument, e.g. a bond, is agreed on the contract date to be delivered at a future date, at a given price. Usually no actual delivery takes place; the contract is normally closed out before the agreed maturity.

Interest rate - swap A contractual agreement with a counterparty to exchange cash flows representing streams of periodic interest payments in one currency.

PRACTICAL LESSONS № 10. Exercises № 1. Translate the text:

MONEY MA

RKETS. The money markets. (text №1)

The money markets consist of a network of corporations, financial institutions, investors and governments, which need to borrow or invest short-term capital. For example, a business or government that needs cash for a few weeks only can use the money market. So can a bank that wants to invest money that depositors could withdraw at any time. Through the money markets, borrowers can find short-term liquidity by turning assets into cash. They can also deal with irregular cash flows - in-comings and out-goings of money - more cheaply than borrowing from a commercial bank. Similarly, investors can make short-term deposits with investment companies at competitive interest rates: higher ones than they would get from a bank. Borrowers and lenders in the money markets use banks and investment companies whose business is trading financial instruments such as stocks, bonds, short-term loans and debts, rather than lending money.

Exercises № 2. Translate the text: Common money market instruments (text №2)

Treasury bills (or T-bills) are bonds issued by governments. The most common maturity - the length of time before a bond becomes repayable - is three months, although they can have a maturity of up to one year. T-bills in a country's own currency are generally the safest possible investment. They are usually sold at a discount from their nominal value - the value written on them - rather than paying interest. For example, a T-bill can be sold at 99% of the value written on it, and redeemed or paid back at 100% at maturity, three months later.

Commercial paper is a short-term loan issued by major companies, also sold at a discount. It is unsecured, which means it is not guaranteed by the company's assets. Certificates of deposit (or CDs) are short- or medium-term, interest-paying debt instruments - written promises to repay a debt. They are issued by banks to large depositors who can then trade them in the short-term money markets. They are known as time deposits, because the holder agrees to lend the money - by buying the certificate - for a specified amount of time.

Exercises № 3. Translate the text: Repos. (text №3)

Another very common form of financial contract is a repurchase agreement (or repo). A repo is a combination of two transactions, as shown below. The dealer hopes to find a long-term buyer for the securities before repurchasing them.