Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
Question
Book Icon
Chapter 6, Problem 1Q
Summary Introduction

To identify: The comparison between the interest rates available at different places.

Introduction:

Interest Rate: A rate at which a borrower is ready to pay and depositor is ready to receive the money is known as interest rate.

Expert Solution & Answer
Check Mark

Answer to Problem 1Q

  • Yes, the difference of the residential mortgage rates of two different cities can be persisted.
  • There are certain forces like demand and supply that can lead to the rates to be equal.
  • No, the cost of money borrows for the business purpose doesn’t lead to the same risk as the money should be borrowed from the place which charges the less interest.
  • The large firms of the NY and C will prefer to take loan which has the less cost of money.
  • To borrow the money the less interest rate is better and to invest the money high interest rate is better.

Explanation of Solution

  • The differences of the interest rates totally depend upon the demand or supply of the financial product that prevail in the market.
  • The increase in supply leads to decrease in the interest rate of New York and rates would be equalized.
  • The increase in demand leads to increase in the interest rate of New York and rates would be equalized.
  • The businesses might take into consideration of the cheapest available mortgages.
  • The center which provides the money at the lowest possible cost should be preferred by the large business firms and the interest rates will be equalized and small firms will be able to get the loan at the lowest cost.
Conclusion

Hence, to invest money the higher interest rate should be preferred and to borrow the money lower interest rate should be preferred and these interest rates has an effect from the demand and supply of product.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Answer in step by step with explanation. Don't use Ai and chatgpt.
Article: Current Bank Problem Statement The general problem to be surveyed is that leaders lack an understanding of how to address job demands, resulting in an increase in voluntary termination, counterproductive workplace outcomes, and a loss of customers. Bank leaders discovered from customer surveys that customers are closing accounts because their rates are not competitive with area credit unions. Job demands such as a heavy workload interfered with employee performance, leading to decreased job performance. Healthcare employees who felt the organization’s benefits were not competitive were more likely to quit without notice, resulting in retention issues for the organization. Information technology leaders who provide job resources to offset job demand have seen an increase in (a) new accounts, (b) employee productivity, (c) positive workplace culture, and (d) employee retention. The specific problem to be addressed is that IT technology leaders in the information technology…
How to rewrite the problem statement, correcting the identified errors of the Business Problem Information and the current Bank Problem Statement (for the discussion: Evaluating a Problem Statement)
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Text book image
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Text book image
Financial Management: Theory & Practice
Finance
ISBN:9781337909730
Author:Brigham
Publisher:Cengage