Importance of interest rates, Finance Basics

Importance of Interest Rates

These are of a specifically relevance to a finance manager since:

i) They measure the cost of borrowing.

ii) Interest rates in a country influence the foreign swap rate of the country's currency.

iii) Interest rates act like a guide to the sort of return such firm's shareholders might want therefore changes in interest rates will affect rates for an approved creditworthy borrower.

Interest may be


a) Base lending rates - Banks lend to individual and small firms at instant margins above the base lending rates. Therefore it is the rates for an approved creditworthy borrower.

b) Inter-Bank Lending rates

For large loans to big firms, such banks will set interest rates at a margin under base rates rather than above base lending rates.

The Treasury Bills Rates - Risk Free

  • The rates at much central bank sell treasury bills to the market.
  • Treasury bills are utilized to raise, short-term funds for the government. Securities questing with the government to raise long term funds such are called gilt-edged securities.
  • Why in different markets segments interest rates differ
Posted Date: 1/30/2013 3:18:56 AM | Location : United States







Related Discussions:- Importance of interest rates, Assignment Help, Ask Question on Importance of interest rates, Get Answer, Expert's Help, Importance of interest rates Discussions

Write discussion on Importance of interest rates
Your posts are moderated
Related Questions
What are the Methods of Underwriting An underwriting agreement may take any of the below three forms: (i) Standing behind the issue: Under this method, underwriter guarant

Advantages of Development Financial Institutions Advantages or Functions or can say Case for Development Financial Institutions 1. They grant venture capital 2. They gra

"Managerial leadership considers that the focus of school leaders ought to be on functions, tasks and behaviours and if these functions are carried out competently the work of othe

evaluate the source of finance for a business project

Characteristics of sole proprietorship The main characteristics of sole proprietorships are as follows: 1) Ownership- The ownership of the business unit is by one person.

Current cost of a bond: You know that the after-tax cost of debt capital for Bubbles Champagne is 7 percent. If the firm has only one issue of five-year maturity bonds outstanding,


Example of Miller-Orr Model XYZ's management has put the minimum cash balance to be equivalent to Sh.10, 000. The standard deviation of daily cash flow is of Sh.2, 500 and the

An industrial engineer proposed the purchase of a RFID Fixed Asset Tracking System for the company's warehouse and weave rooms.  The engineer though that the system would provide a

Explain the term - Underwriting Underwriting is an agreement whereby underwriter promises to subscribe to a specified number of debentures or shares or a specified amount of