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Not usually. A "4 percent increase in the interest rate" usually means that there is some reference interest rate of x percent that is increased to 4 + x percent. This means that the interest paid increases from x percent of the principal to 4 + x percent of the principal. Therefore, the interest paid increases by 100 (4/x) %. For example, if a recent Federal funds rate of 1 % in the United States were to be increased by 4 %, the interest paid on any given amount of principal would increase by 400 %!

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โˆ™ 2010-05-18 14:54:45
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Q: Does an increase of 4 percent in the interest rate result in a 4 percent increase in the total interest paid?
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