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Interest Rates Are Important in 5 Areas!

 


Although we hear a lot of opinions regarding interest rates, their patterns, and their effects, few people seem to comprehend the significance, importance, and relevance of these rates in a variety of aspects of our lives! After decades of engagement in political campaigns, leadership, leadership training/planning, real estate, financial sales and consulting, and other areas, I am certain that learning more about these topics, and how they touch many aspects of our lives, is beneficial! Interest rates matter, whether they are related to personal, organizational, and/or public finance/ expenditures, house ownership and related costs, credit-related concerns, business matters, stock and bond pricing, and so on. With that in mind, the purpose of this essay is to briefly investigate, examine, review, and debate 5 of these areas, as well as how the cost of money affects them.


 


1. Bond prices and interest rates: In general, the price of a bond is inversely proportional to interest rates! When these rates fall, prices rise, and when they climb, the opposite happens! Bonds have a par – value, which is the price that is paid at the conclusion of the period. At maturity, markets normally put them at 100, which equals $1,000 per bond. However, pricing can rise or fall during this time, affecting liquidity-related difficulties!


 


2. Mortgage rates: We’ve been witnessing and experiencing record-low mortgage interest rates for the past few years, which has aided the overall real estate/housing market, particularly in terms of pricing increases! Home prices are at their greatest levels ever in most parts of the country, by a big, dramatic amount! When this rate is low, a property buyer might get more house for his money, because his monthly payments are so low! Consider, however, what the potential repercussions and impacts will be if these rates continue to climb.


 


3. Consumer credit: Low borrowing costs benefit the automobile industry, as well as consumer financing, and so on! Credit card debt has lower interest rates than other types of debt, and there are frequently short-term specials that offer discounts! However, because the majority of these are variable and based on some index, what happens if the index rises?


4. Business borrowing: The cost of business borrowing is also impacted! They now have access to relatively inexpensive – money, which helps them save money on borrowing, general operations, inventory purchases, and so on. But, what happens if this continues to tick – up?


 


5. Effects on stock market prices: For a long time, many people believed that the stock market was the only game in town because bonds paid so little in terms of dividends, etc. Furthermore, many firms have appeared to be in better shape than they are, and we have seen a higher price-to-profit ratio than in the past! How long do you think this will last? Is there a limit to how high it can go?


 


Many factors play a role in these difficulties, including actual and perceived inflation, consumer confidence, politics/government actions/the Federal Reserve, and so on. The more you know and comprehend, the better prepared you will be, ideally!


 


 


 


http://EzineArticles.com/10544282 is the source of this article.

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Roword

2016