FMA-III 1 of 3: Interest Rates and Risk Consideration in Business and Economic Activity

Interest Rates and Risk Consideration in Business and Economic Activity
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In business and economy, interest rate as the cost of borrowing investing money is significant to the growth of economy. When interest rates are high, economy is stifled. On the other hand, economy grows when interest rates are low based on the fact that most of business activities are operated on borrowings.
Therefore, interest rate is of great importance to the economy. Interest rate helps in adjusting inflation in the economy. This is done by adjusting the rate such that it is higher than the inflation rate anticipated hence regulating the situation. It helps businesses cover up for the cost that has been added. Direct effects to the economy are manifested in businesses and personal borrowing of money. For instance with a high interest rates, businesses will not consider borrowing money because the anticipated p...