Business activity cycle, Finance Basics

Assignment Help:

Business Activity Cycle

The interest rates also depend on business cycles as above. Because the economy moves in the four (4) business cycles, such interest rates will shift like within economic recessions, short-term interest rates experience sharp decline than L.T interest rates. This is just because of the following reasons:

490_Business activity cycle.png

i. The CBK operates mainly in the S.T Sector (market) and its intervention has a major effect on S.T interest rates.

ii. L.T interest rates usually reflect the average supposed inflation rate over the next 10 - 20 years.

These expectations do not change usually because L.T interest rates are fixed because of debt covenants entered into throughout borrowing time.


Related Discussions:- Business activity cycle

Return on the annuity, An insurance company offers you and end of year annu...

An insurance company offers you and end of year annuity of $48,000 per year for the next 20 years. They claim your return on the annuity is 9%. What is the most you would be willin

Define new issue market, Define New Issue Market New Issue Market OR P...

Define New Issue Market New Issue Market OR Primary Market New issue market is the segment in which new issues are made.

Cost of retaining finance, Cost of Retaining Finance This will contain...

Cost of Retaining Finance This will contains dividends for share capital and interest for debt finance or can say tax deducted or like effective cost of debt.  Though, when co

Valuation of share, Valuation of Share A number of parties are interes...

Valuation of Share A number of parties are interested however in the value of shares and securities and that will include: Company shareholders, vendors and directors of

What is a treasury bill, What is a Treasury bill? How risky is it? Trea...

What is a Treasury bill? How risky is it? Treasury bills are short-term debt instruments granted by the U.S. Treasury which are sold at a discount and pay face value at maturit

Role of venture capital in economic development, Role of Venture Capital in...

Role of Venture Capital in Economic Development The categories of venture that capitalists might invest will include: a) Business start-ups - Whenever a business has been

Investment analysis, Ask questConsider an 8% coupon bond selling for $953.1...

Ask questConsider an 8% coupon bond selling for $953.10 with 3 years until maturity making annual coupon payments. The interest rates in the next 3 years will be, with certainty, r

Risk adjusted discounting rate – methods of computing cost, Risk Adjusted D...

Risk Adjusted Discounting Rate - Methods of Computing Cost of Capital This method is used to establish the discounting rate to be used for a provided project. The cost of capi

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd