Prime Interest Rate

The Relevance of the Prime Interest Rate, Gross Domestic Product, and Gross National Product

The Prime Interest Rate is the rate of interest that commercial institutions charge their customers, mostly large corporations that are creditworthy (Atesoglu, 2003). It is usually influenced by the federal funds rate, which determines the rate at which commercial banks lend to each other. The Prime Interest Rate is the basis of most other interest rates such as rates for mortgages and personal loans (Atesoglu, 2003). Banks may offer lower rates for well-qualified customers, below the set percentage. For PepsiCo, the prime interest rate is relevant in two main ways: the rate at which banks can lend to the company is determined by the creditworthiness of the company, and the rate affects liquidity in the financial markets. To improve its creditworthiness, PepsiCo can, for instance, pay off its debt and resort to equity for financing operations. This would result in the bank getting loans from banks at a lower prime interest rate. This would be desirable since an increase in the prime interest rate would increase the monthly payments that the company makes. Getting loans at a lower prime interest rate would increase liquidity and provide the company with an opportunity to expand operations.

The Gross Domestic Product (GDP) refers to the total value of all that is produced within a country (Argandoña, 2016). It is a measure that is used by economists and governments to analyze the size and performance of an economy. GDP impacts investment, personal finance, and the rate of job and economic growth. Investors consider GDP when making decisions on the adjustment of asset allocation and investment in different sectors. They also consider GDP when making decisions on which international opportunities to take advantage of. For PepsiCo, monitoring GDP is important for purposes of making decisions on which countries to setup facilities or targets for investment. GDP is also relevant where the company may be looking for opportunities to realize growth through mergers or acquisitions. Such activities should only be undertaken in countries showing rapid GDP growth. The company can also use GDP data to determine whether targeted markets and sectors are growing or declining, informing decision making. Decisions such as increasing the labor force, increasing investment in research and development, and increasing foreign investment will require GDP performance data.

Gross National Product (GNP) refers to a measure of the total value of all services and goods produced by the residents and businesses of a country, regardless of their production location (Argandoña, 2016). It is equal to the summation of an economy’s GDP with all the income earned by the economy’s residents and companies through foreign investments, minus all the income earned inside the country by foreigners and foreign companies. The GNP provides an indicator that is more reliable than GDP in the measurement of the performance of an economy. The measure provides information on inflation rates, savings, manufacturing, investments, production outputs of companies, and employment (Argandoña, 2016). As such, it is relevant for PepsiCo since the company needs such information to make important decisions on investment, countries to expand in, sources of an affordable and readily available workforce, and competition. For instance, the company can use GNP data to determine the production outputs of its competitors. This would provide information necessary to make decisions on marketing and production strategies. The company can also derive information on the rate of inflation in different countries, providing information on which countries would be most profitable and which countries would be the best to invest in.

References

Argandoña, A. (2016). Gross Domestic Product (GDP) and Gross National Product (GNP). Encyclopedia of Business Ethics and Society, Forthcoming.

Atesoglu, H. S. (2003). Monetary transmission–federal funds rate and prime rate. Journal of Post Keynesian Economics, 26(2), 357-362.

Order NOW for a 10% Discount
Pages (550 words)
Approximate price: -

Why Us?

Top Quality and Well-Researched Papers

All ourbpapers are written from scratch. In fact, Clients who ask for paraphrasing services are highly discouraged. We have writers ready to craft any paper from scratch and deliver quality ahead of time.

Professional and Experienced Academic Writers

Our writers keeps you posted on your papers progress - providing you with paper outline/draft. You are also at liberty to communicate directly with your writer.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time, in many cases quite ahead of time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.

Essays

Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.

Admissions

Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.

Reviews

Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.

Reviews

Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.