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Interest Rate In Egypt Essay

791 words - 4 pages

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Interest rates are considered to be the price of holding money and the opportunity cost of any investment. After analyzing interest rates in our course do you think that interest rate in Egypt reflects the real opportunity cost of holding money? Why or why not? Please support your answer with all the references you have searched.
Interest Rate is: The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest is charged by lenders as compensation for the loss of the asset's use. In the case of lending money, the lender could have invested the funds instead of lending them out. That’s ...view middle of the document...

The items weight according to their importance. Depending on the country, the highest weights are usually given to the food, energy, housing, clothing, medical care, transportation and household equipment.

So, the average annual inflation rate is around 8%, this is for sure after excluding the subsidized products, & it’s calculated using a basket of goods that doesn’t reflect the real products most of the Egyptians consume. For example, this inflation is calculated using the regular governmental education, which is fixed fees based and really don’t take into account the cost of privates lessons most households spend huge percent of their income on (more than 3 billion EGP yearly), also, this doesn’t take into account the private schools and colleges which are very costly and their fees increase on a yearly basis. Also, the subsidies don’t reach all those who deserve them and big percent of Egyptians don’t even consume subsidized food or transportation same as in education.
So, our first concern is about the inflation rate itself as an unrealistic rate and doesn’t reflect the real increase in prices of important goods and services in Egypt.

Rate of return on Investment in Egypt:

The rate of return is the ratio between the earnings and the cost of an investment.
Current political situation in Egypt, increases the uncertainty of investors, and makes investing decisions hard to take....

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