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Online Share Trading

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Share installments - mechanics

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Not applicable
With the increase in interest rates today by 50bps, how does this affect the value of share installments. I my opinion I would think that since there is a component of debt in them, the installment buy price would appreciate due to the interest component in them increasing which has to be paid upfront(benefit to those currently holding share installments). Though on the downside the interest component paid upfront is higher to a new entrant. Is my logic right?
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2 REPLIES 2
Not applicable
you not taking a loan you taking a bet
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john_1
Super Contributor
AS the strike is fixed and the interest is priced in on day of issue, there will be no effect outside of the actual underlying price movments. NEW issues will be priced with a higher interest rate component making long term holding of instalments more expensive.
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