• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Interest Rate report

Extracts from this document...

Introduction

RUNNING HEADER: Interest Rate Report Interest Rate report Victoria Peskett University of Phoenix Economics ECO 531 Fred Bell December 7, 2008 Interest Rate Paper Decisions Interest rates can be used to determine the amount of money demanded. The more money demanded for transactions contributing to the nominal GDP the larger the money value. Higher interest rates can be associated with lower volumes of money demanded for transactional use, as the cost of obtaining said cash becomes more expensive. Big Drive Auto may determine that interest rates are too high to borrow, and put off transactions requiring borrowing such as expansion. If interest rates are lower, they may have an increased demand for borrowing activities. ...read more.

Middle

Yield Curve The yield curve or term structure of interest rates is the relationship between the cost of borrowing money and the length of time it is being borrowed. For example, Big Drive Auto may have to pay 6% interest a year to borrow money for a 10 year period of time, but only 5% interest if they borrowed the same amount for a 5 year period of time. In this case the yield curve would have points at 5 years at 5% and 10 years at 6%.Yield curves usually have and upward sloping curve as time increases so due rates, to compensate for the risks involved with longer loan periods. This must be considered as borrowing activity takes place to try and limit the time period a loan is taken from in order to minimize interest rates paid to fund expansions, and development. ...read more.

Conclusion

A business plan needs to allow for changes in the economic environments such as inflation, unemployment, available credit and other aspects dictated by monetary policy and the supply of money. As prices go up due to inflation from say suppliers, Big Drive Auto needs to be able to responds, and hopefully anticipate the changes in order to stabilize their operating costs. Unemployment greatly affects not just the person who is now unemployed but also all those they did business with, this changes the supply of labor and demand for products. Credit also impacts Big Drives Autos ability to sell products. If interest rates are high and or credit is hard to obtain and pay back then consumers are less likely to make discretionary purchases like a new car, however you may see and increase in car maintenance products reflective in Big Drive Autos sales. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Economic Systems section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Economic Systems essays

  1. The Role of expatriation in MNC International Assignments

    A final factor that MNCs need to consider when preparing to expatriate an employee is the compensation and reward package that they provide. Researchers recognise that reward packages that attract, retain and motivate 'outstanding' employees going on international assignments are essential in achieving organisational goals (Phillips and Fox, 2003; Simms and Schraeder, 2005).

  2. With reference to the literature on poverty and development, and using statistical evidence on ...

    http://mdgs.un.org/unsd/mdg/Data.aspx [accessed 4th April 2010] 32 Ministry of Housing and Urban Poverty Alleviation and UNDP, 'India Urban Poverty Report Summary' (2009)

  1. Business Policy

    tax growth rate estimated at 6.3 times, that is higher than 2008 . MACRO-ENVIRONMENT * political factors From the years 2003 to 2010, strategy development insurance market in Vietnamese is reviewed by the government; decree 10/13/2003 about administrative sanctions in the fields of insurance business, the decree about fire insurance

  2. To what extent has Britain suffered from an overvalued exchange rate over the last ...

    Therefore, in order to invest or purchase UK products, pound need to be purchased to be able to pay for the goods. On the other hand, the supply curve indicates people from UK selling pounds to purchase foreign goods or invest in another country.

  1. price elasticity of demand

    Quantity 105 tonnes 100 tonnes P = P2-P1 = 75-70 = 5 Q = Q2-Q1 = 100-105 = -5 EP = Q x P1 = 5 x _70_= - 0.67 (EP < 1 therefore demand is price inelastic) P Q1 -5 105 Example 2 Month 1 Month 2 Price �70

  2. McDonald's organizational systems and sub systems. How has McDonalds transformed the consumer's dining experience

    Their primary responsibility is to prepare the food, serve customers and carry out tasks for the efficient running of the restaurants. Other hourly-paid employees who work alongside them include Training Squad Members, Dining Area Host/eases, Party Entertainers, Administrative Assistants, Security Co-coordinators, Maintenance Staff, Night Closers, Floor Managers and Shift Running Floor Managers.

  1. Free essay

    Managerial Economics

    However, just providing these services in today's competitive market is not good enough. Investment banking faces intense global competition across each of Credit Suisse businesses. Investment Banking competes with investment and commercial banks, broker dealers and other firms offering financial services.

  2. Business Environment. Report on the aspects of the Economic Environment

    Many command economies have transferred into mixed economies. In order to become a mixed economy the role of the market and private sector of the economy must be increased. This can be done in numerous ways including; privatisation of state industries and also encouraging foreign investment into the economy.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work