scholarly journals Pricing a Lease Contract in Presence of Late Payment Extra-Charges

2019 ◽  
Vol 14 (11) ◽  
pp. 179
Author(s):  
Luciano Quattrocchio ◽  
Luisa Tibiletti ◽  
Mariacristina Uberti
Keyword(s):  
Sensitivity Analysis ◽  
Interest Rate ◽  
Lower Bound ◽  
Contract Term ◽  
Extra Charge ◽  
Charge Rate ◽  
Lease Contract ◽  
General Rules ◽  
Payment Rate ◽  
Roll Out

Partial insolvency in leasing contracts may entail to afford additional late payment costs. In this paper we focus on the case that the lessee makes partial payments in due time and settles the debt augumented by the late payment interests later. The presence of the extra-costs drives the lease Effective Annual interest Rate (EAR) to deviate from the lease contract rate. The aim of this work is to illustrate how design the contract payback amortization to stick EAR to the lease contract rate, when the lease contract rate, the late payment rate and the contract term are exogeneously fixed. First we achieve a proxy for EAR given by the lease contract rate plus an extra-charge rate addendum. We show that this latter addendum is sensitive to the payback Macaulay Duration, a weighted size and timing average. Specifically, the longer the Macaulay Duration, the smaller the extra-charge rate addendum. As a consequence, two general rules to drive EAR close to the lease contract rate roll out, specifically: (1) the payment pattern should be set with a long Macaulay Duration; and (2) the surrender value of the leased good should be put large. As the contract settlement is given, we show that EAR is delimited by a lower bound and an upper bound. Then the payback amortizations with fixed instalments are studied. To get insight on the importance of EAR inputs we roll sensitivity analysis out through illustrative applications. The results of the paper are useful to provide policymakers a better knowledge about the effects on EAR of the contract conditions on the pattern of payments.

scholarly journals Sensitivity Analysis of Fuzzy Activity-Based Life Cycle Costing

2018 ◽  
Vol 225 ◽  
pp. 05002
Author(s):  
Freselam Mulubrhan ◽  
Ainul Akmar Mokhtar ◽  
Masdi Muhammad
Keyword(s):  
Sensitivity Analysis ◽  
Life Cycle ◽  
Interest Rate ◽  
Life Cycle Costing ◽  
High Impact ◽  
Final Output ◽  
Left And Right ◽  
The Interest Rate ◽  
Operation Cost

A sensitivity analysis is typically conducted to identify how sensitive the output is to changes in the input. In this paper, the use of sensitivity analysis in the fuzzy activity based life cycle costing (LCC) is shown. LCC is the most frequently used economic model for decision making that considers all costs in the life of a system or equipment. The sensitivity analysis is done by varying the interest rate and time 15% and 45%, respectively, to the left and right, and varying 25% of the maintenance and operation cost. It is found that the operation cost and the interest rate give a high impact on the final output of the LCC. A case study of pumps is used in this study.

The Case for Imposing Cashlessness: A Review Article

2018 ◽  
Vol 56 (4) ◽  
pp. 1587-1591
Author(s):  
Neil Wallace
Keyword(s):  
Fiscal Policy ◽  
Interest Rate ◽  
Lower Bound ◽  
Central Bank ◽  
Review Article ◽  
Zero Lower Bound ◽  
Illegal Activity ◽  
The Interest Rate

In The Curse of Cash, Rogoff (2016) makes two arguments. (i) Large denominations of currency are primarily used for illegal activity. Therefore, eliminating them would have benefits that far outweigh the costs in terms of lost seigniorage. (ii) The zero lower bound (ZLB) on the interest rate implied by the possibility of holding large amounts of currency is a costly constraint on central-bank policy. The best way to eliminate the ZLB is to eliminate all but small denominations of currency, ten dollars and lower, and to have those be in the form of coins. The style of the book, no models and no symbols, works fairly well for (i), but not so well for (ii). For (ii), the author is unclear about a crucial matter: what fiscal policy accompanies alternative interest-rate settings chosen by the central bank? ( JEL E26, E42, E43, E52, E58, E62)

scholarly journals The Empirical Implications of the Interest-Rate Lower Bound

2017 ◽  
Vol 2017 (083r2) ◽  
pp. 1-74
Author(s):  
Christopher J. Gust ◽  
◽  
Edward P. Herbst ◽  
J. David López-Salido ◽  
Matthew E. Smith
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
The Interest Rate ◽  
Empirical Implications

scholarly journals The Empirical Implications of the Zero Lower Bound on the Interest Rate: The Case of the Czech Economy

2016 ◽  
Vol 64 (2) ◽  
pp. 603-616 ◽  
Author(s):  
Miroslav Hloušek
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Zero Lower Bound ◽  
Inflation Volatility ◽  
Percentage Points ◽  
Monetary Policy Rule ◽  
Tradable Sector ◽  
The Interest Rate ◽  
Macroeconomic Implications ◽  
Empirical Implications

This paper uses an estimated DSGE model of the Czech economy to study the macroeconomic implications of various shocks when the interest rate is constrained by the zero lower bound. The goal is to identify which shocks represent threats for the economy and how large the distortions are. The results show that four single shocks can take the economy to the zero lower bound, and that of the four, productivity shock in the tradable sector is the most dangerous. The consequences for the behaviour of macroeconomic variables are nontrivial and, quite naturally, increase with the size of the shock and the frequency of occurrence. If the economy is subject to all model specific shocks, there are distortions in terms of lower average values of output and consumption (by more than one percentage point) and higher inflation volatility (by more than six percentage points). To reduce these costs, the central bank should give higher weight to inflation and lower weight to the output gap in monetary policy rule.

scholarly journals Mixing QE and Interest Rate Policies at the Effective Lower Bound: Micro Evidence from the Euro Area

2021 ◽  
Author(s):  
Christian Bittner ◽  
Alexander Rodnyansky ◽  
Farzad Saidi ◽  
Yannick Timmer
Keyword(s):  
Interest Rate ◽  
Lower Bound ◽  
Euro Area
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