It will increase the cost of autos and homes. Iterest rates also will affect the consumer retirement benefits high-interest rates will lead to high returns from the cash invested in retirement benefits plan. Cnsumers will have to spend more to finance autos and homes because of increased cost of borrowing. Te increase in interest rates increases the future value of an annuity invested in a trust fund. I can be attributed to increased return due to increased revenue that translated to the consumer. Icreased revenue from the loans investor’s future value.
Iterest rates increase the growths of annuities. Te increase in interest rates will reduce the present value of an annuity. I is because the discounting factor reduces with increase in interest rates; avalue of money reduces with increase in interest rates. A the interest rates, icrease the present value of an investment reduces. I is the composite cost of capital that a firm is currently using. I is calculated by determining the weighted average cost of each source of capital in the firm’s capital structure This cost debt, euity, and preference shares.
Te cost of debt is affected by interest rates. Te increase in interest rates will hike the cost of debt. Te interest rate will spirally increase the cost of capital in the firm this will lead to increased WACC from a previous year to currents year. Iterest rates will increase the cost of production of the firms in the market. I will lead to reductions in earnings by the industries. Sme of the firms will increase their debts by borrowing firm to the of operation in the market.
Te increase in the cost of operations will be translated to increased prices in the market. Hgh prices in the market will lead to the inflationary spiral that affects the economic stability of the nation. Te domestic currency will devalue, echange rates will increase, ol prices in the domestic market will increase compared to the foreign market leading to a general increase in the cost of living. I the government through trade tariffs consumers does not protect the corporate sector and suppliers resort to imports compared to domestic products.
I will reduce the market share of the corporate sector leading to low revenue this might lead to the collapse in the long run. Te collapse of the corporate sector will affect the nations GDP since the corporate sector is the main source. ..
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