The term investment implies different meanings in business management, economics and finance but all are closely related to each other.While the bank interest rate to the consumers is defined as the current rate of return given on the savings.
Investment decision plays key role in purchasing assets for business enterprises as they tend to maximize the profits. So in business management, they have to evaluate the net benefit of making further investment and also the factors on which investment depends, the most important of which is bank interest rate.
According to the Macroeconomics concept the interest rate given by banks and investment are inversely related to each other. If banks increases the interest rates the people draw money out from the business and put it in the banks as they get high return from there thus high reward from the banks.
The business owners who made investments in their business by borrowing from the banks cut down their investment if the bank interest rate increases as they have to pay high costs of making investment which reduces their profitability.
Consumers tend to have highest returns on their savings they also compare the relative costs that if they put their savings in banks or in a business what will be more convienient.
Investing in banks, they will analyze the no of trips they would have to make to the banks, the costs of making each trip, the no of ATM machines available to the consumers also the online banking availability.
Another important factor for relying on bank interest rate is how stable the economic policies that are prevailing in the economy.In an economy where the macroeconomic policies fluctuate randomly people does not rely on banks and keep their savings with them.
In short, the bank interest rate increase or decrease can have a high influence in reducing or implementing investments in businesses vice versa.
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