Interest rate risk in International market-
Some points are as following:
Fluctuation in interest rates affects the cash flow and profit
of the company when there in higher interest rates, company has to
pay high interest amount and the same is paid out of the cash and
profit so cash and profit come down.
Interest rates affect the demand of financial alternatives
available in the market, if banks charge higher interest rate,
demand for loan will come down and borrowers will seek another
cheaper finance option.
Change in Interest rate of a country affect exchange rate of
the country.
Interest rates on bonds affects the prices of bonds if interest
rates go up, price of bond comes down and vice versa.
Higher interest rates discourage the consumption and encourages
the savings as customer will not take more loans so the demand will
come down.