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By Chickie Maxwell
The financial markets have been in a state of disarray since the financial crisis in late 2007 and 2008. Despite of this fact, many lenders and borrowers are still involving themselves in certain securities and investment activities. Investment rates ultimately determine whether or not an investor and borrow will take part in using or investing in certain securities. These investment rates are always changing, but they usually operate around a certain mean for each individual type of security.
Certificates of Deposit and CD Rates
Certificates of deposit (CDs) can be acquired from all kinds of financial institutions. They usually offer better investment rates than a typical savings account and mature after a specified number of months or years. Different institutions use different rates for their certificates of deposit, and different rates are also assigned for each class of CD, usually depending on time to maturity. For a 6 month CD, most banks are offering rates between 0.30 and 0.60 percent annually. For 1 year CDs, most banks are offering a rate between 0.85 and 1.10 percent annually. A 3 year CD can usually earn about 1.31 percent at most institutions today. Most banks and institutions are offering rates around 1.70 percent for 5 year CDs.
Money Markets
A money market account is generally lumped in with savings accounts. This special type of account is also backed by a certain number of securities, so its interest rate is slightly altered by how well the market is doing. The particular securities that are affecting a particular money market account can be acquired by the institution that is offering the money market account. Most money market accounts are currently earning an investment rate that is averaging about a 1.00 percent annual percentage yield. Some money market accounts that have a minimum deposit requirement are offering slightly higher rates.
Treasury Bills and Current Treasury Bill Rates
Treasury bills are securities that are offered to investors by the government in order to pay for certain government initiatives and programs. The rates that are offered to Treasury bill holders are affected by certain government fiscal policies and interest rates in the market. Often times, the rate on treasury bills is called the risk free rate and is used to determine risk premiums for other investments. It is dubbed the risk free rate because there is a near zero probability that the government will default on its obligation to repay. Currently the 1 year T-bills have an annual percentage yield of 0.13 percent. The rates for 5 year, 10 year, 20 year, and 30 year T-bills are 0.71, 1.24, 2.59, 2.94 percent respectively.
Peer to Peer Lending
Generally, peer to peer lending is done when two people are interested in doing business with each other. One party wants to borrow money and the other wants to lend it for a small fee, usually called investment rates. The interest rates in this peer to peer lending is decided by the parties involved, so there is no set rate on what it can be. The average peer to peer lending rate tends to be slightly higher than the current treasury bill rates.
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