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Own rate of interest


The rate of interest which is implied by the change in price of a particular commodity. If p, is the commodity's price at time t, and P t+ 1 that of one period later, then the own rate of interest can be calculated simply as (p t + 1 - Pt )/p,, which is the proportionate rate of change of the price. That is to say, if one unit of the commodity is bought at time t and held for one period, then the own interest rate gives the earned rate of return. This can be compared to the rate ofinterest earned on buying assets such as bonds in order to determine the most profitable opportunity for investment.

Reference: The Penguin Dictionary of Economics, 3rd edt.