Discount Rates and Interest Rates 2What Are the Factors?
Discount rates
are effected in many ways, such as; the time of year the product is beingintroduced, the shape of the economy, job growth, or unemployment, retail sales, inflation or recession, and the value of the dollar, and if the seller gets the product at a good price, so he canin return offer it to the consumer at a decent price in return.Competition, if a similar product with a similar price and discount, quality, of a product,if its better, or needed than the competition’s product, or demand for the item. “When amanufacturer sells an item to the wholesaler, the manufacturer deducts a certain amounts fromthe list price of the item. The amount deducted is called the trade discount.” (Cleaves & Hobbs,2008)Interest rates also affect trades, which helps the economy in a recession, to rebuild theconsumer’s confidence, and boost poor retail sales. “Slashing interest rates makes it easier for consumers to obtain financing for big ticket purchases such as automobiles and homes and boosts confidence, helping loosen up wallets at the mall.” (Cable News Network, 2008)Interest Rates and EffectsWhen jobs are plentiful, and consumers buy more, inflation, demands increase, morefunds become available to borrow, the interest rates rise, but, when demands are low, interestrates will drop, to help the economy.The federal government actions affect interest rates, because it is the nation’s biggest borrower, “Because of its vast taxing powers and the strength of the U.S. economy, the federalgovernment has the highest credit rating and its debt is therefore a preferred investment.”(FinWeb, 2007)Foreign Investors also affect rates; they are always willing to loan money, influencingrates. The economy and the condition also affect rates, and forces the government opens bank
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