Intrest Rate Report Essay Example | Topics and Well Written Essays - 1000 words

Intrest Rate Report - Essay object lessonWhen interest grade argon reduced the cost of capital declines and investors depart be to a greater extent uncoerced to invest and so this ordain increase the direct of investment in the organisation.High interest rank also mean that loans ar repaid at higher order, many consumers finance their purchases financed using sucked funds from banks and for this designer businesses may experience a reduction in their sales level when interest rates are increase, therefore businesses will tend to hold less inventory when interest rates are increased especially when stocks are purchased using borrowed money from financial institutions.A business will finance by equity and by debt, when the cost of debt rises as interest rates increase then the decision by business owners will be to finance through equity. For this reason therefore interest rates will affect the decisions made a business on how to raise capital for expansion purposes.The co st of operating(a) businesses increases when interest rates are increased and the cost of operating businesses will decline when interest rates are lowered. ... Current Yield sophisticateThe birth curve is a curve that depicts the relationship amongst interest rates and date to maturity of securities. Using data from the US treasury website the yield curve as of 21st January 2009 is as followsFrom the above chart that depict the yield curve it is evident that the yield curve is an upward sloping curve. This means that if a business borrows for a period of 7 days then the higher will be the interest paid to the financial lender. Therefore the lower the adoption period the lower the interest paid. Therefore business will opt to borrow for a get around period of time to reduce the cost of capital. On the other hand it is also means that the more an investor or institution holds financial instruments such(prenominal) as bonds then the higher will be the returns. enliven rates and customer demand at man-sized drive autoAn increase in the level of interest rates in the economy will affect the level of sales at big drive auto. This is due to the fact that the cost of borrowed funds rise and consumers are less likely to borrow funds to fianc vehicle purchases. For this reason the sales levels are likely to decline. The other reason why sales levels may decline is the fact that consumers may prefer to save rather than spend, high interest rates means that consumer savings will earn more in the economy and therefore a consumer will prefer to save or even invest in other attractive financial instruments such as stocks and bonds. If interest rates are to be reduced the cost of borrowed funds declines and more consumers are expected to be encouraged to borrow more form financial institutions to finance car purchases, therefore the demand for products at big drive auto will increase when interest rates