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hi guys i need some understanting. what is the effect of a substantial rise in interest rates?

+3 Votes
May 2nd 2014 AN ACCA USER 160 Points

3 Replies

+2 Votes

exposure to rising interest rates:
1. if company has a significant proportio of floating interest rate debt, the effect will cut down the profit
2. higher interest rate would lead to finanial distress of company, e.g. for those who is paying substantial amount of fixed commitment of interest charge every month
3. if company has a significant amount of surplus cash invested in fixed interest rate securities, it will not enjoy the rising benefit
4. rising interest rate cause less spending and more saving on domestc household, one way of gov intervention to the market, if gov believe the inflation is too high

May 4th 2014 AN ACCA USER 1,180 Points
0 Votes

interest rats increases due to many reasons,
the degree of risk attached.
due to goverment intervention.
the degree of of inflation rate change.

May 2nd 2014 AN ACCA USER 140 Points
0 Votes

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February 24th 2017 AN ACCA USER 17,840 Points