Where a bank “accepts” some kind of debt instrument usually at a discount. Debt instruments are basically IOU’s written by one organisation in favour of another. If the company that is owed the money wants to get that money before it is due, they can take the instrument which is proof of that debt to a bank and “discount” it. This means that the bank will pay them out the money now – less a small fee or “discount”. This fee, when expressed as a percentage of the principal amount, can be expressed as an annualised percentage and is known as the Bankers Acceptance rate (the BA rate). The BA rate is an important rate of interest because it reflects the tightness or otherwise of the money supply. When money is tight then the BA rate will rise and vie versa. Interest is the “price” of money.

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