Interest Rates Essays


U.S. Interest Rates Rise and Fall Essay

Essay Prompt The History of the Interest Rate Research the history of the prime interest rate since 1980. Create a chart that shows the changing interest rate and depicts the economic and political conditions, factors, and reasons for the changing interest rate. Include a written summary of your findings. Your response should be 2-3 paragraphs (5-7 sentences). The History of the Interest Rate The prime interest rate peaked on 19 December 1980 at 21.50% from where it gradually declined 4% over the next four months before rising again to 20.50% by mid-1981. However, this marked the end of high interest Continue Reading...

Quantitative Easing

also U.S. treasuries. This is done with the main aim of decreasing the long-term interest rates. Low interests also favor the individual investors. This is an advantage to the American economy as it has plenty of investments coming into the country (Cochrane, 2011). Quantitative Easing was used to stimulate the economy following the "Great Recession." At the start of the financial crisis, the European Central Bank did not decrease its rates. However, when the Lehman Brothers' institution collapsed, the ECB cut its key interest rates to historic low levels. In the period between October 2008 and May 2009, the… Continue Reading...

Macroeconomics and Gas Stations

The Federal Reserve's most recent signals to the market are the higher interest rates will be required. This has implications for both the overall health of the economy and for the decision to buy a gas station. First, higher rates are likely because the economy is nearing full employment and thus inflation is going to be more of a concern going forward (Matthews, 2016). Second, high rates affect the cost of debt. If inflation is a risk, higher rates will arrive, and they will serve to put a cooling on the U.S. economy. Yet, growth is not that high,… Continue Reading...

How to Grow the Economy

at a consistent yet tepid pace despite very low interest rates that are just now starting to be raised. Even so, what was done in response to the Great Recession ran the gamut of Keynesian investment to lowering interest rates and taxes as a means to prop up the economy or perhaps even jumpstart it. Generally speaking, an economy that wants its people to invest and grow will lower taxes, even if it is on a temporary basis. During the aftermath of the Great Recession, an example of this would be the Social Security tax "holiday" that many enjoyed.… Continue Reading...

Oreo\'s Entry into China and India

long-term target would be to fund the initiative with long-term bonds. With today's low interest rates, this is a particularly appealing approach to acquiring the capital necessary for long-term investment (research and development, marketing, taste testing, consumer surveys -- all of this could be funded by corporate bond sales at low interest rates). The research and development could be slated for 1-2 years with a finished product developed and ready to be marketed in China thereafter. Brand development would follow and the Americanization of the product could be achieved once the culture had shown an interest in the "American"… Continue Reading...

How Democracy Leads to Tyranny

all the choice he has. The real decisions -- the big ones concerning trade, interest rates, going to war, etc. -- are made by individuals at a much higher level (the representatives) who typically represent interests of other entities (such as those who supported their campaign or who have allowed them to have their "career" in politics: a federal congressman is paid well above the middle class average, after all). Meanwhile, the middle class man is obliged to obey the laws, regulations, tax code, TSA orders at airports, and so on that the ruling establishment passes on his behalf.… Continue Reading...

Addressing the Budget Deficit Problem

Because the deficit is the result of too much borrowing and spending (if interest rates increase, paying the interest on what has been borrowed will alone be enough to bankrupt the U.S.), the only policy to pursue is one of cuts, reduction of government offices, cuts to the bureaucracy (Berry, 2016), promotion of business through incentives such as what the Trump Administration poses to offer, and end to the financing of wars and interventions, and an end to the funding of the outdate NATO alliances. These cuts would be sufficient to have money left over to actually spend on… Continue Reading...

Negative Interest Rates Analysis

order to be used elsewhere. In return, banks compensate savers interest incomes. Meanwhile, the interest rates are quoted as APY (annual percentage of yield) and savings account earns 3% APY. However, negative interest rates reverse this arrangement where savers or depositors are obliged to pay banks for holding their money. Moreover, central banks penalize commercial banks for depositing their funds with them. For example, The ECB (European Central Bank), some smaller European banks, and Bank of Japan have introduced the negative interest rate policy where banks, as well as other financial institutions, will have to pay charges for allowing… Continue Reading...

Why 2017 May Be a Good Time to Buy Gold

U.S. and near 300% in China. The world is being buried under a tsunami of debt and if interest rates rise, the interest payments alone on the debt will be unserviceable. Greece is a micro-version of what will happen at a macro-level all over the world. Central banks have lost control and their failed attempts at stimulus will only make the impending crash that much more painful. Another index that Collum utilizes is the S&P 500, which is the index of companies selected by the S&P Index Committee based on market cap, industry and liquidity. It is used to… Continue Reading...

Introduction to Global Business

sources of capital. Cost of Debt is the weighted average of various interest rates paid on long-term borrowings whereas Cost of Equity is the rate of return on equity required by stockholders. Chapter 15 This chapter includes a discussion of global accounting and taxation. Accounting includes recording, summarizing, and reporting of the economic activities and events of an organization. It is pertinent in business decision-making and the management and control of operations. The financial statements reported by a company include the income statement, balance sheet, statement of retained earnings and statement of cash flows. Globally, there are two sets… Continue Reading...

External Business Environment from 3 Squares Restaurant

interests are thereby enabling the company to borrow and expand the business. Low- interest rates mean consumers could get credit at low costs. On the other hand, higher inflation rates translate to higher costs of credit and borrowing consequently influencing its success (Ho, 2014). The risky economic markets rising from political uncertainties affect the restaurant. President Donald Trump promises on lowering taxes and cutting down on regulations resulted in the sale of risky bonds (Fontaine, 2016). 3 Squares Restaurant also bets on the promises to improve productivity and increase revenues. Lower corporate taxes could result in freeing cash for interest… Continue Reading...

Student Loans Essay

instance, the majority of loans from banks come with high interest rates and these loans do not contain the same provisions for deferment of payment that are provided by federal loans. By contrast, Federal Direct Loans can be deferred for repayment until borrowers are enrolled less than half time as undergraduates or graduate students.4 The U.S. Department of Education has a number of loan servicers that administer the student loans for the William D. Ford Federal Direct Loan (Direct Loan) Program as well as for loans that were completed originally pursuant to the Federal Family Education Loan (FFEL) Program… Continue Reading...

Financial Planning and Digital Literacy for Students

out loans can be tricky. Student loans tend to have reasonable interest rates, but any amount of interest is still going to add up over time. The less the loan principal, the less the amount of total interest owed and the less I will have to pay over time. Another thing I learned this week is the difference between simple and compound interest. Sometimes we have no control over the type of loan we receive, but it helps to be armed with this understanding in those situations where there is a choice between different loan types. I also did… Continue Reading...

Repealing Of Glass Steagall a Mistake

come at taxpayer expenses, which would have significant impacts down the line for interest rates, the national debt, and other macroeconomic implications that could stretch out for years. So Glass-Steagall instituted structure and order, and in particular segregated risky banking from non-risky, and repeal of Glass-Steagall not only promises to introduce a higher level of risk to commercial banking, but to put the taxpayers on the hook for the downside of that risk. Repeal Glass-Steagall was repealed in 1999 via the Gramm-Leach-Billey Act. Following the repeal a couple of things happened. First, investments and mergers within the industry led… Continue Reading...

Federal Reserve and Interest Rates

supposedly going to do). The ECB is another one that is still buying bonds and driving interest rates down. In doing so, these banks are propping up the stock markets but they are hurting savers and funds that require substantial returns on their investments (a ludicrously high 5%--by today’s standards—in most cases, which is why so many pension funds in states across the U.S. are warning of collapse and warning retirees not to expect their state governments to be able to make good on the promises they were given when they were employed). In other words the Fed is… Continue Reading...

Financial Statement Analysis Of Verizon

the borrowing will pay off with future revenue, especially when borrowing is done at low interest rates. However, Verizon is heavily leveraged at a point when interest rates are rising, so there is definitely some risk there for the company. But overall, Verizon is in good financial health, especially given that it still has strong operating cash flows. Current Financial Health Current Ratio 0.87 Debt/Equity Ratio 90.78% The current ratio is not unreasonable for Verizon, though ideally it would be a little bit higher, over 1.0. The bigger issue is the trendline here. The current ratio was quite healthy… Continue Reading...

Apples Stock Movement 2017

stock even at these all-time high valuations, I assumed investors would continue to buy in. interest rates are still low and investors seeking a significant return really have no choice right now but to buy into the stocks that are driving the market—stocks like Apple. If the Fed actually decides to really start raising rates significantly, the market could pull back—so that is why I would be reluctant to hold onto these stocks for much longer. Continue Reading...

The U.s Economy and Health Care

for funding the above growth similarly affects resource availability for other undertakings. With interest rates mounting on account of governmental borrowings, families’ and organizations’ cost of capital grows as well. This serves to crowd out outlays in other activities. Lastly, greater expenditure typically leads to growth in intergenerational wealth transfer from the population’s youth to older clusters. International competitiveness of American goods Technically, increased healthcare expenditure decreases American services’/goods’ competitiveness within global markets. Not varying any other element, growth in healthcare expenditure must be reflected by the cost of end product. Considering the swift rise in healthcare expenses within other… Continue Reading...

Macroeconomic Indicators

tightening (QT) in recent years, and the end of unconventional monetary policy, interest rates are set to continue to rise as the central bank reduces its balance sheet. With bond yields already going up and volatility at all-time lows, questions remain about how the market will react to this normalization process. One thing is for certain, however: the recent rise of prices across several asset classes has coincided with the years of QE beginning in 2008. Home prices have soared, bond prices have soared, equity prices have soared, college tuition has soared, and even precious metals have soared (along… Continue Reading...

Coca Cola Analysis

laws, environment policy, FDA certification, etc.; Economic factors: gross domestic product, interest rates, forex rates, disposable income, retail price index, demand and supply conditions, and unemployment rates; Social factors: trends, practices, traditions, wants, population, educational qualifications, aspirations, income distribution, corruption, customer awareness and education, standard of living, religious values, and family structure; and technological factors. Introduction Key Facts Name: The Coca-Cola Company Industries served: Beverage (more than 600 brands) Geographic areas served: Worldwide (more than 200 countries) Headquarters: Atlanta, Georgia, United States Current CEO: James Quincey Revenue (US$): 41.863 billion (2016) 5.5% decrease over 44.294 billion (2015) Profit (US$):… Continue Reading...

Oil Crises Term in West Africa

more, in a growth environment that is weak in general and with policy interest rates limited by the zero lower bound in a number of economies, the implemented monetary policy may come to be susceptible to downward risks to price stability. With regard to nations in West Africa that import oil, the collective impact of decreasing prevailing account deficits and inflation returning with the policy targets is bound to make it possible for central banks to decrease interest rates (Baffes et al., 2015). A number of nations in West Africa offer their citizens substantial subsidies. Nonetheless, more often than… Continue Reading...

H&m Trade Comparative Advantages

of employment. The Romanian government would in that situation find ways to lower the cost of doing business – lower interest rates, possible via a business development bank, or by allowing foreign banks to do business in Romania. Weaker environmental regulations, weaker regulations on unions, and lower tax burdens are other ways that the government can attract FDI – showing active support for the industry and working to reduce the cost of doing business across the board will likely have a positive impact. 4. The case is old, but surely H&M is not smaller than Zara. H&M has 4500 stores… Continue Reading...

Lemon Law and Spot Delivery Law in Maryland

ahead of time that even if the dealer cannot find financing terms at the lower interest rates that would be more affordable, the dealer may be able to find financing terms at a higher rate, though it would be more expensive for the consumer. Simply by making this information known to the consumer ahead of time prevents the bait-and-switch tactic from being applied, because the consumer is forewarned that the higher interest rates may be the only ones that the dealer can find. This law of stipulating that the dealer be up front and provide a range in which… Continue Reading...

American Dream and Wealth Gap

option. The intervention by central bankers to prop up asset prices while taxing the middle class by keeping interest rates artificially low (which punishes savers, the traditional pursuers of the American Dream), is a big cause of this growing wealth gap. By getting the Fed out of the marketplace and keeping the central bank from printing money, devaluing the currency, suppressing interest rates, and taxing the middle class, America could actually become again a place where the American Dream can be pursued by one and all. Instead, today, the Dream is for none but the wealthy. This class is… Continue Reading...