Response to Part 1: Interest Rates
Hello, I am very impressed by your reasoning concerning factors that influence interest rates. I agree that when the demand for money is higher than supply, the rate of interest rates increases. Conversely, when the demand is less than the credit supply, interest rates decrease. When the rate of inflation increases, interest rates increase, and when there is low inflation, the rate of interest rates decrease. I also agree that Federal Reserve policies and government borrowing influence interest rates. I aspire to work in the sports industry, and I am aware that increased interest rates will reduce an organization’s borrowing and loan repayment ability. Did you know that loan repayment lengths influence interest rates too? When companies acquire loans with long repayment periods, their interest rates may be higher than their counterparts with shorter repayment timeframes (Kar & Swain, 2014). Nevertheless, I applaud you for a job well done!
Response to part 2: Stock Valuation, Risk, and Returns
Hi, I am fascinated by your view of how stock valuation is conducted. I am now aware that stock shares are more valuable when their rate of return equals or exceeds the yield return rate. I have also learned that investors consider stocks to be valuable when their justified price exceeds or equals that of the current market price. I agree with you that firms may finance their businesses using equity or debt. The majority of organizations prefer equity financing because it does not have any repayment guarantee. Debt financing is also suitable but may be disadvantageous when a firm is unable to repay debts when affected by factors that reduce revenue income. However, kindly allow me to discredit equity financing. When firms are unable to generate dividends successively, investors may request for insolvency (Boshkoska 2016). Nevertheless, I must congratulate you for a very enlightening essay!
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References
Boshkoska, M. (2016). Financing The Needs and Growth of Companies by Issuing Corporate Bonds . Retrieved from https://www.researchgate.net/publication/303408479_FINANCING_THE_NEEDS_AND_GROWTH_OF_COMPANIES_BY_ISSUING_CORPORATE_BONDS
Kar, A. K., & Swain, R. B. (2014). Interest rates and financial performance of Microfinance institutions: Recent global evidence. The European Journal of Development Research , 26 (1), 87-106. doi:10.1057/ejdr.2013.33
