Fixed Term

  

The term was broken, then applied Krazy glue.

A fixed term is just a set period of time for things like money coming due to be paid (think: the principal of a bond) or a contractual liability, like the delivery of 14,000 vibration-insensitive batteries.

The term is set. Like...8 years or 96 months is a fixed duration. No ifs ands or "...but but but I thought it was 100 monthses."

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Finance: What is the difference between ...6 Views

00:00

Finance allah shmoop what's the difference between a fixed and

00:05

a floating rate All right well we'll just start this

00:09

one out with your favorite time Donald and melania need

00:17

to borrow money to buy a building here's the history

00:20

of ten year t bill costs for the last few

00:23

decades Well rates were almost ten percent in the nineteen

00:26

seventies and then they fell all the way to being

00:29

almost free in two thousand eighteen Well if donald had

00:34

borrowed money nineteen eighty to buy a building with us

00:37

fixed rate he'd have had to pay about ten percent

00:40

interest for all this time That raid in nineteen eighty

00:44

was fixed and you know i'd be paying ten percent

00:47

for thirty five years very expensive rent on that money

00:50

It's not like a dog who can't you know have

00:52

pups different kind of fixed you know it's fixes in

00:55

he won't move Position is just a set number fixed

00:59

in place All right well donald would have overpaid massively

01:02

in his loans by paying ten percent interest when he

01:05

could have been paying seven percent here and four percent

01:09

here And maybe like two percent change here if the

01:12

loan he'd taken out in nineteen eighty was floating well

01:15

it would have floated downward along the way like that

01:18

Well most for floating loans have a preset set of

01:22

terms which move along with the rates of the fed

01:24

charges to loan money to banks who then mark up

01:27

the loans a bit and resell the money to really

01:29

borrowers like donald and kill you and me That is

01:32

the floating rate might be set at quote the average

01:36

federal funds rate plus ah hundred faces points over the

01:40

trailing six month period to be reset every month Unquote

01:45

Yeah something like that So in this case his rate

01:47

would have floated downward And obviously things can go the

01:50

other way as well Joe six pack it's a mortgage

01:53

for a home he can barely afford today Eight hundred

01:56

grand mortgage at four percent Well it cost him thirty

01:59

two grand a year to rent that money just the

02:02

interest and he has to make principal payments as well

02:04

So is total payments or something like forty grand a

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year in year one of thirty Well if rates go

02:09

back up and they easily could and become say seven

02:13

Percent instead of that four percent a few years later

02:16

three four five years later Well then all of a

02:18

sudden his cost of renting that money goes from thirty

02:21

two grand a year in interest costs too something like

02:24

fifty or sixty grand a year in interest costs And

02:27

joe six pack because he didn't fix his raid at

02:30

that four percent figure when he borrowed it let things

02:33

float and well he ended up you know living in

02:37

his car when he couldn't afford paying The mortgage owns

02:40

home anymore and had to sell it And so yeah

02:42

he's living in his suv down by the river But 00:02:45.5 --> [endTime] luckily for him that suv floats

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