In the LW model, a falling trend rate of growth of potential output, coupled with other factors, contribute to the decline in the estimated natural

rate of interest in both periods.

4] While changes in the expected real

rate of interest are not directly observable, it may be possible to detect the repercussions of such a change, by observing the behavior of the relative price of short-lived to long-lived assets.

In the first instance, the model ties down a priori the long-run response of investment to a change in the real

rate of interest: The capital stock and, consequently, long-run investment rise by 1 percent for a 1 percent decline in the cost of capital (based on an estimated elasticity of substitution equal to one); and the percentage decline in the cost of capital for a given percentage decline in the

rate of interest varies inversely with the depreciation rate of capital.

The

rate of interest to be charged or paid will depend on the

rate of interest previously paid or charged.

In other words, the government should not undertake to view itself as a financial institution that is free to extract a high

rate of interest from taxpayers with no negotiating power while paying a lesser rate.

Instead, the final 1990 tax bill took a different approach: increasing the

rate of interest payable by C corporations on "large corporate underpayments.

Both series of bonds initially bear interest in the weekly rate mode, but may be converted to a daily, short-term, auction or long term

rate of interest.

The COPs will be issued initially in the weekly rate mode, but may be converted to a flexible or fixed

rate of interest.

By charging a low

rate of interest BNZ appeals to cardholders who revolve a negative balance.

These capital securities, which mature in 30 years, are set at a fixed

rate of interest for five years at a pretax interest cost of 5.

In addition, CIT (i) rescinds and revokes its Notice of Default/Reservation of Rights letter dated September 2, 2004 effective as of February 1, 2005 and (ii) confirms that they will cease charging the default

rate of interest of 2% over the bank

rate of interest, as defined, on all obligations under the Agreement effective as of January 1, 2005.

The COPs will be issued initially in the weekly rate mode but may be converted to a flexible or fixed

rate of interest.