Interest Rates Organizations must obtain money to exist. Think about the balance sheet; assets equal liabilities (debt) plus equity (the money contributed by the owners). Even equity financing has a cost; no one would want to invest in a company if they were not going to get a return. Organizations must provide the minimum return […]
Tag Archives: Yield curve
What role do interest rates play in allocating capital to different potential borrowers?
Low Interest Rates Encourage Investment and Stimulate Consumer Spending What is the price paid to borrow debt capital called? What are the two items whose sum is the cost of equity? What four fundamental factors affect the cost of money? What role do interest rates play in allocating capital to differentpotential borrowers? What happens to […]
What is a yield curve, and what information would you need to draw this curve?
Yield curve What is a yield curve, and what information would you need to draw this curve? Distinguish among the shapes of a “normal” yield curve, an “abnormal” curve, and a “humped” curve. If the interest rates on 1-, 5-, 10-, and 30-year bonds are 4, 5, 6, and 7 percent, respectively, how would you […]
