Investment and Interest Rate

1. Positive- consumers pay less in interest

Negative- increased spending (more money to spend)
2. Positive : Higher interest rates tend to moderate economic growth
Negative: limit the growth in consumer spending
3. Positive: borrow large sums of money for cheap and invest them in an attempt to earn
higher returns (Amount of Borrowing Used for Investment.)
Negative: interest rates are low
4. Conversely, an increase in the supply of credit will reduce interest rates while
adecrease in the supply of credit will increase them. The supply of credit is increased by
an increase in the amount of money made available to borrowers. ... And as the supply
of credit increases, the price of borrowing (interest) decreases.
5. In general, as interest rates are lowered, more people are able to borrow more money.
The result is that consumers have more money to spend, causing the economy to grow
and inflation to increase. The opposite holds true for rising interest rates.
6. What Happens When Interest Rates Rise? When the Fed increases the federal
funds rate, it does not directly affect the stock market. The only truly direct effect is that
borrowing money from the Fed is more expensive for banks. ... This has the effect of
decreasing the amount of money consumers can spend.
7. Generally, higher interest rates increase the value of a country's currency.
Higherinterest rates tend to attract foreign investment, increasing the demand for
andvalue of the home country's currency. ... One of the primary complicating factors is
the relationship that exists between higher interest rates and inflation.
8. If market interest rates rise, then the price of the bond with the 2% coupon rate
willfall more than that of the bond with the 4% coupon rate. purchase bonds in a low-
interest rate environment. A bond's maturity is the specific date in the future at which the
face value of the bond will be repaid to the investor.
9. Typically, higher interest rates reduce investment, because higher rates increasethe
cost of borrowing and require investment to have a higher rate of return to be profitable.
Private investment is an increase in the capital stock such as buying a factory or
machine.
10. When the investment outlook is good, interest rates tend to move higher to
compensate investors who could earn even higher returns in risky assets like stocks.
But rates decline when investors have a lower risk appetite and higherdemand for
conservative and stable cash flow.
11. So they invest less during high interest rate states of economy and more duringlow
interest rate times. When interest rates increase, it becomes more costly for firms to
borrow money. ... Primarily because it increases the cost of borrowing money and quite
a bit of investing is done with borrowed money.
12. Here's how investors can profit from rising interest rates.
1. Invest in Brokerage Firms. ...
2. Invest in Cash-Rich Companies. ...
3. Lock in Low Long-term Rates on Existing Financing. ...
4. Buy With Financing Now. ...
5. Invest in Technology and Healthcare Stocks. ...
6. Go With Shorter Term or Floating Rate Bonds. ...
7. Invest in Payroll Processing Companies.

13. Bonds, especially long-term bonds, are not a good place to invest when interest
rates are rising. If interest rates continue to rise, as I expect they will, bondscould fall
a lot more. The reason rising interest rates cause bond prices to go down
is best illustrated with a simple question.