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

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 rate… Continue Reading...

Macroeconomics and Gas Stations

body (the Federal Reserve, rather than Congress). 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.… Continue Reading...

How to Grow the Economy

not "end" until 2009. The economy grow 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… Continue Reading...

Oreo's Entry into China and India

Capsim for a 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… Continue Reading...

How Democracy Leads to Tyranny

opposite. A "vote" is usually 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… Continue Reading...

Addressing the Budget Deficit Problem

(Ban, 2015). 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… Continue Reading...

Negative Interest Rates Analysis

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 central banks… Continue Reading...

Why 2017 May Be a Good Time to Buy Gold

the 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… Continue Reading...

Introduction to Global Business

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 of… Continue Reading...

External Business Environment from 3 Squares Restaurant

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 payment. Last year,… Continue Reading...

Student Loans Essay

the majority of private or bank loans. For 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… 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

massive retail financial institutions. This would 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… 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 assumption is that 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… Continue Reading...

Apples Stock Movement 2017

big investors to purchase the 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

Gruber, 2017). Greater governmental borrowing 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… Continue Reading...

Macroeconomic Indicators

(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 with… Continue Reading...

Coca Cola Analysis

impacting the company: trade restrictions, tax policy, labor 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)… Continue Reading...

Clipboard Tablet Co Marketing and R&d Analysis

company: trade restrictions, tax policy, labor 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… Continue Reading...

Oil Crises Term in West Africa

All the 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… Continue Reading...

H&m Trade Comparative Advantages

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 and does $27… Continue Reading...

Lemon Law and Spot Delivery Law in Maryland

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 financing terms might be… Continue Reading...

American Dream and Wealth Gap

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 essentially protected by the Fed. The executives are… Continue Reading...

The American Dream Essay

That is because jobs do not pay as well or offer as many hours as they used to. interest rates for savings accounts are near zero, discouraging people from saving. It all leads to a nation of debt filled constant loss and instability. This was not the America from three, four decades ago. People back then could earn enough to save each week and have enough money after a few years or decades, to purchase a home. “Previously in America, Jim the butcher put a percentage of his weekly earnings into his savings account for a few decades and… Continue Reading...

Bitcoin Essay

much money is being printed or how a currency is valued. Imports and exports, inflation rates, interest rates, and real estate markets mean nothing to cryptocurrencies. Bitcoin might function as a currency, but it is a lot more than that. The basic elements of bitcoin are the mining process and the block chain concept. Bitcoin Mining Bitcoins are “mined” by people who participate in the process using special hardware and software, and also a working knowledge of how the system works. Ordinary people can participate in the mining process. However, most people who use bitcoin do not actually participate… Continue Reading...

Financial Managers

direct and indirect effects on the company. The major macroeconomic variables such as inflation, interest rates, unemployment, GDP, and exchange rates can all directly influence the financial performance of the company. But these variables also impact on things like government policy, so there are indirect impacts on financial performance as well, and the financial manager also needs to understand these. The main tool that financial managers use are complex financial models. These models seek to illustrate the impact that different variables have on the company – both internal and external variable. Forecasts are created using different macroeconomic and market… Continue Reading...

Economics and Global Capitalism

recession. We are encouraged to spend rather than to save (especially since the Federal Reserve drove interest rates down to near 0% for so long, which meant that savers were essentially losing value over time because the rate of inflation was higher than the interest they were earning on their savings). So markets really dictate our thought processes, our actions (we work long hours all week in order to be able to spend and have the kind of consumerist life expected of us). The markets, meanwhile, take on a life of their own for the economy, intertwining as they… Continue Reading...

United States Markets Essay

be difficult to attract investors because of increase in interest rates and costs of borrowing as well as slow investment and consumption that will damage the economy (Schuman, 2011). Third, the nation's currency would weaken, which would in turn undermine the value of currency reserves across the globe. This implies that the country would face slow economic growth, deteriorating living standards, and slower growth of global economy because of America's status as world super power. There are several factors that could make a semi-strong or strong efficient market become weak or less efficient. For the United States markets, one… Continue Reading...

U.s. Interest Rates Rise and Fall Essay

four months before rising again to 20.50% by mid-1981. However, this marked the end of high interest rates, as from that point on the Fed took a sharp turn downward. By 1985, interest rates were at 10%. By 1992, they were at 6%. They flirted briefly with a return to 10% till 2000, whereupon the bursting of the tech bubble/dotcom bubble precipitated a further decline—4% by 2003—followed by a bounce back to a high of 8.25% in 2006 (at the height of the housing bubble—which burst the following year, bringing the market down with it). Today, rates sit at… Continue Reading...

Should We Get a Basic Income

in the game, would be madness—and those with a sense of how crushing debt can become when interest rates rise know exactly this. And, it should be noted, that that is exactly what is happening: interest rates are rising. The London Interbank Offered Rate (LIBOR) and the Federal Funds Rate are both on the rise, which means that servicing the mountain of debt on the global accounting books is going to become increasingly more difficult (the higher rates go, the more one holding the debt has to pay in interest on that debt—which means the more debt one has… Continue Reading...

Tesla Stock Analysis and Recommendation

been supported by QE. But with the Fed set to tighten and interest rates rising, investors have to be careful about buying risk assets at all-time highs. TSLA is one of the riskiest of risk assets: it is an equity that has risen entirely on speculation and social media made promises by a celebrity-type CEO who makes jokes on April Fool’s Day of the company going bankrupt. TSLA should be avoided. Its market cap is too high for both its actual earnings (which are nil). Its P/E is ridiculously high—like that of other Tech sector darlings, whose earnings do… Continue Reading...

Economic Outlook Of the Us Economy

the business cycle will become relatively stronger because of increased interest rates by the Fed. This will also be influenced by the establishment of policies that improve business fundamentals to enhance growth in the stock market and the overall U.S. economy. The U.S. dollar has significantly underperformed against other major world currencies, but value of the currency is expected to strengthen in the first and second quarter of 2018 due to increased interest rates. The U.S. has recently adopted fiscal and monetary policies that have significant implications on the economy, especially in terms of boosting economic growth. At the… Continue Reading...

Africa from Colonialism to Neocolonialism

of foreign aid. In essence, the said loans bear high interest rates. Accordingly, Sankara was of the opinion that “debt is a cleverly managed re-conquest of Africa, aiming at subjugating its growth and development through foreign rules… thus, each one of us becomes the financial slave, which is to say a true slave” (Harsch, 2014, p. 174). Towards this end, therefore, it can be argued that the vicious circle of seeking loans and the subsequent repayment of the same has no net benefit on the development agenda of the entire African continent, and only serves to sustain the dominance… Continue Reading...

Blockchain

determined by the forces of supply and demand, based strictly on its users, without the influence of interest rates and other monetary policy tools that are used by central banks to influence the value of their currencies. The way to resolve the issue of trust that naturally arises from a lack of a central bank, or any underlying asset, is the concept of the distributed ledger. The value of Bitcoin could not be established on a peer-to-peer basis. The counterparties, even if known to each other, would have no legal basis for establishing that value, and in any case… Continue Reading...

Apple Finance Department

exchange rate and other forms of macroeconomic risk are important. Macroeconomic risk is risk associated with either interest rates, or other major changes in macroeconomic conditions, that might have a direct financial impact on the company. Interest rate risk, for example, is higher when the company has issued bonds or has other obligations that are at a set rate. Foreign exchange rate risk can be a substantial source of risk for international companies. Apple’s products are assembled in China, from parts that are made either in China or other parts of Asia. Apple might pay USD for the finished… Continue Reading...

Lending Institutions Human Capital and Health Care

financial institutions such as banks, and increasing the short-term interest rates so as to aid the growth of India’s economy (IMF, 2018). It is also important to note that so as to generate economic reform and change, these international lending institutions are also aiding developing counties through the re-establishment of market economies in developed nations such as the United States. Taking this into consideration, it can be claimed that international lending institutions have a pivotal role to play in the economic, social and political growth and development of developing nations. Discuss, with examples, at least four (4) substantive ways… Continue Reading...

Interest and Loan Calculations

credit score when the vehicle is fully repaid on time. Moreover, the aspect of low interest rates will have the advantages of facing cheaper borrowing costs. Financial lenders make use of an individual’s credit score to measure his or her financial accountability, consistency, and past. There are numerous advantages to having good credit as compared to bad credit when qualifying for a loan. To begin with, a good credit score enables an individual to be completely updates on his or her credit reports and also makes the person become qualified to obtain loans straightforwardly devoid of any difficulties. In… Continue Reading...

The Global Economic Crisis

a free market economy. It is very much decided by states’ central banks (through the establishment of interest rates, set by Treasury bill buying via QE) how an economy might proceed. We may be sitting at the end of a very long bull run as we speak. Some commentators believe we are at the very least nearing the late stage of the business cycle and foresee a deep recession ahead. My question is this: how many bubbles and how much devaluation of money could have been avoided had the central banks not colluded to respond to the Global Economic… Continue Reading...

Utilitarianism

to pay for subsidized care. The government is already more than $20 trillion in debt. If interest rates go up, the government will have trouble simply servicing its debt. I will have my free health care, but others will working just to pay taxes just to service the bill for my health care. Other programs will likely have to be cut—such as social security. Spending on the military would probably have to be cut in order to make sure there is enough money to cover everyone’s health care. I for one think spending on the military should be cut… Continue Reading...

What Is Causing Inflation

following the Global Economic Crisis of 2008 that the Fed kept interest rates low (which punishes savers), started buying Treasury bills hand over fist (like the rest of the world’s central banks—with the ECB even dipping into corporate bonds) in order to keep the market propped up and rates low, and all that new money worked to dilute the value of the Notes already in circulation so that the purchasing power of dollar was essentially cut in half thanks to the federal government’s and the Federal Reserve’s belief that a few federal departments, big banks, insurance companies and ratings… Continue Reading...

The Health Care Administration

be the value at a specific date in the future based on the present value and on the interest rates (Meyers D., 2015). References Accounting for Management, (2017). Simple and Compound Interest. Retrieved February 17, 2018 from https://www.accountingformanagement.org/simple-and-compound-interest/ Meyers D., (2015). Time Value Of Money: Determining Your Future Worth. Retrieved February 17, 2018 from https://www.investopedia.com/articles/fundamental-analysis/09/net-present-value.asp Smirnov Y., (2018). Future Value of Money. Retrieved February 17, 2018 from http://financialmanagementpro.com/future-value-of-money/   Continue Reading...

Trump Tax Cut Effects

there are best practices and guidelines that are generally followed. For example, interest rates typically go down when the economy is struggling and go up when things are going well. This is one of many lessons that any educated economist has learned and has learned should apply given certain high-level metrics. However, the very slow recovery from the Great Recession proves that best practices only go so far. Works Cited Stewart, James. \\"Trump Tax Cuts & The Economy: Time Will Tell, Maybe.\\" nytimes.com. n.p., 2018. Web. 23 Feb. 2018.   Continue Reading...

Maryland's Laws on Loans

NOT be a legal loan for a National Bank, based in a state which caps interest rates at 25%? Answer: An secured consumer loan for the purchase of a 10 year old used car in its home state, at an interest rate of 27%. 10. Suppose that a creditor fails to properly disclose the APR of an unsecured, open-ended credit plan (i.e. a credit card) to a consumer, and the consumer sues and obtains a judgment against the creditor under TILA. If principal balance was $10,000 and the Finance Charge was $8,000 and the consumer paid a total of… Continue Reading...

Minimum Wage and Aggregate Demand

bubble economy from bursting—and now the Fed is trying to raise interest rates to get some of the bubbles back down to a manageable size. That will lead to another problem—the fact that so much credit has been issued and is still being issued today that if rates go up, it will be very hard for debts to be repaid and either defaults will occur or else people will simply stop borrowing. Neither case bodes well for the economy as both will likely see a decrease in aggregate demand as a result. The government’s role in the economy should… Continue Reading...

Why Noise Traders Do Not Move Markets

institutional investors and fund investors have been forced into adopting a risk-on strategy to obtain the desired yield, as interest rates have been kept near zero since the crisis of 2007-2009. Now that the Fed Funds Rate is rising, one can see the anxiety of the market, with volatility rising and high beta stocks seeing investors get weak hands. A better factor to study would have been to measure high beta stock price action by movement in the Fed Funds Rate—but the researchers’ interest is in noise investors and whether they are the reason high beta stocks have lower… Continue Reading...