Final answer:
Assets are not considered in interest computations; instead interest rate, time, and principal are the key variables. Banks don't always physically hold listed assets, due to fractional reserve banking. The value of loans in the secondary market fluctuates based on risk and changing economic interest rates.
Step-by-step explanation:
The variable that is NOT considered in interest computations is assets. When computing interest, the main variables considered are the interest rate, the time for which the money is borrowed or invested, and the principal amount, which is the initial sum of money borrowed or invested. The money listed under assets on a bank balance sheet may not actually be in the bank because banks operate on a fractional reserve system. This means that only a fraction of the bank's deposits are kept in reserve for withdrawals. The rest of the money is used for issuing loans and other investments. Thus, the cash recorded as an asset can be loaned out or invested elsewhere, making it not immediately present in the physical bank.
When buying loans in the secondary market for a bank or financial services company, several factors affect the price one is willing to pay for a given loan: a. If the borrower has been late on a number of loan payments, the loan is riskier and thus, might be purchased for less. b. If interest rates in the economy have risen since the bank made the loan, it means that new loans would be issued at higher rates, potentially making the existing loan less attractive, and it might be bought for less. c. If the borrower is a firm that has declared a high level of profits, the loan is less risky as the firm is more likely to repay, and the loan might be bought for more. d. If interest rates in the economy have fallen since the bank made the loan, existing loans at higher rates become more valuable, and such a loan might be bought for more.