Market at Tenochtitlán

Market at Tenochtitlán
The market at Tenochtitlan. Mural by Diego Rivera, Palacio Nacional, Mexico City

Friday, October 2, 2020

Feedback on interest rate exercise

Overall you did well on this research. Here is the link to the information from the 20 groups; I've summarized some of the information (if you have trouble opening the link, sign in to your university account).

The research is not easy and not straightforward. It is the kind of research that your boss might ask you to do about a competitor if you were working at a bank. Sometimes these banks make it difficult for a consumer to find the real, true cost of a loan, or the real true rate they will receive for their deposits. You have to dig below the surface.

On the spreadsheet, notice the pattern of interest rates on auto, mortgage, and credit card loans. The interest rate is the price the bank is placing on the loan; the higher the risk of the type of loan, the higher the interest rate. The banks pay a much lower interest rate to depositors; they then turn around and lend those deposits at higher rates to other customers.

You will notice that some groups researching the same bank came up with different numbers. In some cases it's because more detail was needed. For example, Santander offers 3% interest on deposits--much higher than anyone else in Spain--but only if the depositor maintains a balance of at least 3,000 euros. There was also a lot of variance on credit card rates--possibly because they offer a variety of products. 

 

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