# Interest Model

## Intro

DEFED uses a proven interest rate model to balance liquidity risk with the cost of capital utilization. The borrowing rate depends on the utilization of funds. The utilization rate is the percentage of total deposits that have been lent, which provides a timely and flexible response to the current game of chance in the lending market. Based on this indicator, interest rates are adjusted to encourage borrowing or to discourage liquidity risk.

The interest rate model will achieve the following effects:

* When capital is available, low interest rates encourage lending.
* When capital is scarce, high interest rates encourage loan repayment and deposit growth.\\

## **Borrow Interest Rate Curve**

<figure><img src="https://3666141929-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6KiaRPBhUSC1nnzjcB2f%2Fuploads%2FdIH4dphDl1PFGzSh8Wkl%2Fimage.png?alt=media&#x26;token=7b5aefa2-1309-46e4-99f6-a2ddcb712cac" alt=""><figcaption></figcaption></figure>

## **Deposit Interest Rate Curve**

<figure><img src="https://3666141929-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6KiaRPBhUSC1nnzjcB2f%2Fuploads%2FAfxAXwjqOER0gD5HpTba%2Fimage.png?alt=media&#x26;token=d1f3a2f8-f983-4d64-9273-a74a8bdecb40" alt=""><figcaption></figcaption></figure>

## Details

| Utilization Rate (%) | Borrow Rate (%) | Deposit Rate (%) |
| -------------------- | --------------- | ---------------- |
| 1%                   | 0.123%          | 0.001%           |
| 2%                   | 0.246%          | 0.003%           |
| 3%                   | 0.369%          | 0.007%           |
| 4%                   | 0.492%          | 0.012%           |
| 5%                   | 0.615%          | 0.018%           |
| 6%                   | 0.738%          | 0.027%           |
| 7%                   | 0.862%          | 0.036%           |
| 8%                   | 0.985%          | 0.047%           |
| 9%                   | 1.108%          | 0.060%           |
| 10%                  | 1.231%          | 0.074%           |
| 11%                  | 1.354%          | 0.089%           |
| 12%                  | 1.477%          | 0.106%           |
| 13%                  | 1.600%          | 0.125%           |
| 14%                  | 1.723%          | 0.145%           |
| 15%                  | 1.846%          | 0.166%           |
| 16%                  | 1.969%          | 0.189%           |
| 17%                  | 2.092%          | 0.213%           |
| 18%                  | 2.215%          | 0.239%           |
| 19%                  | 2.338%          | 0.267%           |
| 20%                  | 2.462%          | 0.295%           |
| 21%                  | 2.585%          | 0.326%           |
| 22%                  | 2.708%          | 0.357%           |
| 23%                  | 2.831%          | 0.391%           |
| 24%                  | 2.954%          | 0.425%           |
| 25%                  | 3.077%          | 0.462%           |
| 26%                  | 3.200%          | 0.499%           |
| 27%                  | 3.323%          | 0.538%           |
| 28%                  | 3.446%          | 0.579%           |
| 29%                  | 3.569%          | 0.621%           |
| 30%                  | 3.692%          | 0.665%           |
| 31%                  | 3.815%          | 0.710%           |
| 32%                  | 3.938%          | 0.756%           |
| 33%                  | 4.062%          | 0.804%           |
| 34%                  | 4.185%          | 0.854%           |
| 35%                  | 4.308%          | 0.905%           |
| 36%                  | 4.431%          | 0.957%           |
| 37%                  | 4.554%          | 1.011%           |
| 38%                  | 4.677%          | 1.066%           |
| 39%                  | 4.800%          | 1.123%           |
| 40%                  | 4.923%          | 1.182%           |
| 41%                  | 5.046%          | 1.241%           |
| 42%                  | 5.169%          | 1.303%           |
| 43%                  | 5.292%          | 1.365%           |
| 44%                  | 5.415%          | 1.430%           |
| 45%                  | 5.538%          | 1.495%           |
| 46%                  | 5.662%          | 1.563%           |
| 47%                  | 5.785%          | 1.631%           |
| 48%                  | 5.908%          | 1.701%           |
| 49%                  | 6.031%          | 1.773%           |
| 50%                  | 6.154%          | 1.846%           |
| 51%                  | 6.277%          | 1.921%           |
| 52%                  | 6.400%          | 1.997%           |
| 53%                  | 6.523%          | 2.074%           |
| 54%                  | 6.646%          | 2.153%           |
| 55%                  | 6.769%          | 2.234%           |
| 56%                  | 6.892%          | 2.316%           |
| 57%                  | 7.015%          | 2.399%           |
| 58%                  | 7.138%          | 2.484%           |
| 59%                  | 7.262%          | 2.571%           |
| 60%                  | 7.385%          | 2.658%           |
| 61%                  | 7.508%          | 2.748%           |
| 62%                  | 7.631%          | 2.839%           |
| 63%                  | 7.754%          | 2.931%           |
| 64%                  | 7.877%          | 3.025%           |
| 65%                  | 8.000%          | 3.120%           |
| 66%                  | 10.857%         | 4.299%           |
| 67%                  | 13.714%         | 5.513%           |
| 68%                  | 16.571%         | 6.761%           |
| 69%                  | 19.429%         | 8.043%           |
| 70%                  | 22.286%         | 9.360%           |
| 71%                  | 25.143%         | 10.711%          |
| 72%                  | 28.000%         | 12.096%          |
| 73%                  | 30.857%         | 13.515%          |
| 74%                  | 33.714%         | 14.969%          |
| 75%                  | 36.571%         | 16.457%          |
| 76%                  | 39.429%         | 17.979%          |
| 77%                  | 42.286%         | 19.536%          |
| 78%                  | 45.143%         | 21.127%          |
| 79%                  | 48.000%         | 22.752%          |
| 80%                  | 50.857%         | 24.411%          |
| 81%                  | 53.714%         | 26.105%          |
| 82%                  | 56.571%         | 27.833%          |
| 83%                  | 59.429%         | 29.595%          |
| 84%                  | 62.286%         | 31.392%          |
| 85%                  | 65.143%         | 33.223%          |
| 86%                  | 68.000%         | 35.088%          |
| 87%                  | 70.857%         | 36.987%          |
| 88%                  | 73.714%         | 38.921%          |
| 89%                  | 76.571%         | 40.889%          |
| 90%                  | 79.429%         | 42.891%          |
| 91%                  | 82.286%         | 44.928%          |
| 92%                  | 85.143%         | 46.999%          |
| 93%                  | 88.000%         | 49.104%          |
| 94%                  | 90.857%         | 51.243%          |
| 95%                  | 93.714%         | 53.417%          |
| 96%                  | 96.571%         | 55.625%          |
| 97%                  | 99.429%         | 57.867%          |
| 98%                  | 102.286%        | 60.144%          |
| 99%                  | 105.143%        | 62.455%          |
| 100%                 | 108.000%        | 64.800%          |

\\
