2 Discussions And 1 Journal Article In APA Format

Part I:

The interest rate is the profit that is received over time in relation to an amount loaned (Gitman & Zutter, 2012). It is the compensation that a supplier of funds expects and a demander of funds must pay. A variety of factors can influence the equilibrium interest rate. One of them is inflation, a rising trend in the prices of most goods and services. For example, a lender may be lender may be hesitant to lend money for any period of time if the purchasing power of that money will be less when it’s reimbursed, therefore the lender will demand a higher rate which is called inflationary premium. Thus, inflation pushes interest rates higher; deflation causes rates to decline. A second factor influencing interest rates is a risk. Interest rate risk arises from adverse changes in interest rates, causing higher interest costs or lower investment income and therefore lower profits or even losses. At any point when individuals see that a specific speculation is more dangerous, they will expect a higher profit for that venture as remuneration for bearing the hazard. A third factor that can affect the interest rate is a liquidity preference among investors. The term liquidity preference refers to the general tendency of investors to prefer short-term securities (Gitman & Zutter, 2012).

Part II:

One of the interesting topics of Chapter 7 and 8 was Going Public. When a firm decides to sell its stock in the primary market, there are three possible ways to do them: Either it can be done with a public offering or with right offerings or with a private placement. To go public, it is very important to get approvals from their current shareholders because currently the company is privately owned and issued stocks. After the approvals, the next step is to get all the documents certified to prove the legitimacy of the company and get investment banks to underwrite the offerings. After this, a company gets registered with SEC and the investment community can begin analyzing the company’s prospects. At this point, all the investment bankers and company executives start promoting the company’s stock by road shows, media to attract potential investors from all over the place. And at last after the underwriter sets terms and prices the issue, the SEC must approve the offering and it becomes public (Gitman & Zutter, 2012). Companies decide how they want to go public depending on the level of involvement company wants from the market and how much capital business needs. Recently Spotify went public and they didn’t release additional shares, rather they simply list existing shares directly on the NYSE without getting help or relying on underwriters to help assess demand and set a price ( Disis & Fiegerman, 2018).

References:

Gitman, L., & Zutter, C. (2012). Managerial Finance. Boston: Prentice Hall - Pearson.

Jill Disis and Seth Fiegerman, April 3, 2018. Spotify goes public in an unconventional IPO. Retrieved from: http://money.cnn.com/2018/04/02/technology/business/spotify-ipo/index.html