Question

Monitoring the Cost Of Money: Interest Rates

Interest rates, the cost of money, influence most all factors related to personal and corporate capital budgeting. The more obvious personal information for the cost of money is the rates associated with a mortgage or car loan. As a CFO you would “shop” interest rates to find the best rate for your financing needs.

1. Would you, as the CFO, finance your projects as soon as possible if the cost of capital was expected to drop? Please explain.

2. More importantly, where do you find the information to analyze expected changes in interest rates?

3. Please list references and in-text citations.

4. PLEASE LOOK AT YOUR GRAMMER WHEN YOU ARE WRITING. MAKE SURE YOU HAVE COMPLETE SENTENCES SO THAT I CAN READ IT AND LIST REFERENCES PLEASE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Answer 1

1)The interest rates is the cost of money/finance of the amount we borrow from banks or financial Institutions or some Private source. The higher the interest rates, higher will be the interest expense/cost to the project which is being financed.

So, the CFO of the project or company is always lookout for cheaper rate of interest, so that finance cost of the project could be lowered. The sources of information are the periodical news bulletin from banks and financial institutions. The periodical lowering of the various reserves by the Central Bank of the country will make the banks and financial institutions to lower the interest rates on various types of loans provided by them.

So, yes, as a CFO of a project we will go for financing of our projects as soon as we find lowest interest of the times.

2)As explained above, the financial news bulletin so released by the banks and other financial institutions are the main source of information towards the rate of interest on different kinds of loans or finance assistance. The lowering of the various reserves by the Central Bank of the country, is a sources of information, as it tempt a bank to lower its interest rates on loans.