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An
indexed rate is an
interest rate that is calculated based upon
two variables. The first variable is the base rate
or the "margin" which typically is expressed as a
percentage or points. The second variable used in
calculating the indexed rate is usually one of the
common published rates such as the Prime Interest
Rate, as published in the Wall Street Journal, or
the U.S. Treasury Bill (T-Bill) rate, or the
LIBOR. The indexed rate, or the final interest
rate, is determined by adding the base or
margin to the published index rate. When
choosing a loan it’s worthwhile to fully
understand how the indexed rate is calculated. |
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