You are the financial manager of a company of your choice. You have been asked to share with a group of college interns the process of interest rate determination and how it affected the economy 10...

Interest Rate Determination
Interest rate depends on the movement and fluctuations in the money market. It is dependent on
the demand and supply of money in the economy at a given point of time. The five significant
economic factors that affect interest rates are as follows-
1. Policies of the Central bank- The countries using the centralized banking system, uses
the interest rate determined by the central banks. For determining the interest the
government’s economic observers formulate a policy that assist in ensuring the stable
prices and liquidity for the country. This policy is regularly checked to ensure that the
supply of the money within the economy is neither too large which in turn causes the
prices to increase nor too small which in turn causes the prices to decrease. The retail
banks are responsible for exposing the money in the economy and they are key
instruments used by the central banks to manipulate the money supply in the economy.
2. Recession- During recession, the economic activities slows down. The prediction of fall
in profit percentage...