Question

Answer in 200 words.

The Fed is signaling that interest rates will increase this year. How does that affect you (1) as student? (2) as consumer? (3) as an investor? Please explain how t will affect the three units mentioned (student, consumer, investor) and give examples.

Answer 1

If Fed is signalling that interest rates will increase this year this will affect to a wide section of the society and Individuals:

Students will get affected as if Fed will increase interest rates this in turn will increase the rate of interest on education loan and current payment on existing loans will increase if student loan is variable interest loan.

Consumer will get affected as finance charges will increase and purchasing power of the consumer will decrease due to increased interest rates. This will affect the demand of the consumer durable and would results in more finance cost.

Investors will get affected as they will demand more returns as the market interest rate has increased and this will increase the required rate of return demanded by investors. Increased market returns will decrease the present worth of investment as market interest rate is more than the return offered.