Interest Presentation

Interest Rates

Presentation

By Michelle and Temi

What are Interest Rates ?

To put it simply, interest is the price you pay to borrow money – whether that's a student loan, a mortgage or a credit card. When you borrow money, you generally must pay back the original amount you borrowed, plus a certain percentage of the loan amount as interest.

objectivEs

loans

5.25%

Objective 1

Interest rates as low as possible

This represents the current interest rate in the United Kingdom as of January 2024

Objective 2

SHigh economic growth

Objective 3

Inflation rate at 2% or below

Uk interest Rates 1984-2014

If a business/ individual borrows money, they have to pay interest on the loan. – The impact of low interest rates has been helpful. – Base rate:the rate of interest around which a bank structures other interest rates. > Explaining the base rate: if bank of england raises the base rate , all other borrowing / saving rate are likely to move in the same direction and visa versa. > Since 2008, the base rate has been 0.5%. > In the 1980's interest rates were much higher which peaked at 15%. – The use of interest rates help control the economy. – Monetary policy: using changes in the interest rate and money supply to manage the economy.

– Changes in interest rates are likely to affect the overheads of a business. – Interest rates are a part of overhead costs. – If interest rates rise, businesses are likely to have to pay higher interest payments on their borrow E.g., a business may borrow £10k in an overdraft. The annual payments would rise from £600 to £700 if the rate of interest rose from 6 to 7 percent a year. – not all borrowing is at variable rates of interest – variable rates: means the bank and other lenders are free to charge the interest rate on any money borrowed – Many loan businesses are at fixed rates of interest: meaning the bank cannot charge the rate of interest over the agreed term of the loan. – So... a rise in interest wont affect a business overheads with fixed term loans. – But... if a business wanted to take out new loans, it would have to pay the higher interest rate the bank or lender is now charging

IN

Interest Rates

EOC

Effects on Cost

– Changes in interest rates are likely to affect the overheads of a business. – Interest rates are a part of overhead costs. – If interest rates rise, businesses are likely to have to pay higher interest payments on their borrow E.g., a business may borrow £10k in an overdraft. The annual payments would rise from £600 to £700 if the rate of interest rose from 6 to 7 percent a year. – not all borrowing is at variable rates of interest – variable rates: means the bank and other lenders are free to charge the interest rate on any money borrowed – Many loan businesses are at fixed rates of interest: meaning the bank cannot charge the rate of interest over the agreed term of the loan. – So... a rise in interest wont affect a business overheads with fixed term loans. – But... if a business wanted to take out new loans, it would have to pay the higher interest rate the bank or lender is now charging

Effects

Contextualize your topic

+ Info

Effects of Interest Rates on Investment

2. Saving Attraction

3. Existing Loans

1. Loan Costs

Paying them off

Expenses of projects

Investments and saving

Businesses can put their funds into saving schemes rather than investing e.g., if interest rates rise from 5 to 8 percent a business may decide to save instead of invest.

A rise in interest rates will increase the cost of existing variable rate borrowing. A business can choose to pay off existing loans rather than increase its investment. This will reduce costs and reduce risks associated with borrowing

Investment projects are financed through loans A rise in interest increases the cost of borrowing money. When total costs has increased, profitability decreases. This may discourage investment, showing a fall in investments in the economy

Demand

Effects of interest rates

The level of interest affects aggregate demand for goods/ services in the economy Aggregate demand: A rise in interest rates will cause a fall in aggregate demand. A fall in interest rates will case a rise in aggregate demand. Businesses are affected by this If demand falls, their sales go down because less is being bought. If demand rises, their sales go up because more is being bought.

2. Domestic investment

1. Domestic Consumption

4. Exports and Imports.

3. Stock

¡Thanks!

Got an idea?

Let the communication flow!

With Genially templates, you can include visual resources to wow your audience. You can also highlight a particular sentence or piece of information so that it sticks in your audience’s minds, or even embed external content to surprise them: Whatever you like! Do you need more reasons to create dynamic content? No problem! 90% of the information we assimilate is received through sight and, what’s more, we retain 42% more information when the content moves.

• Generate experiences with your content.
• It’s got the Wow effect. Very Wow.
• Make sure your audience remembers the message.