Business Decisions & Interest Rate Impact

The assignment focuses on helping a student understand how to make business decisions that are less vulnerable to fluctuations in interest rates. The student is instructed to analyze various business scenarios and use statistical tools like standard deviation and characteristic regression lines to determine the best course of action for minimizing the impact of interest rate changes. The analysis relies on identifying businesses with lower sensitivity to interest rate variations.

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REPORT SHOWING THE APPLICATION OF STATISTICAL
TOOLS TO EVALUATE DATA
INSTITUTION
NAME
COURSE
DATE

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Interpretation of statistical analysis to make a decision.
Statistical analysis tools are essential tools for a thorough and scientifically validate the
analysis of the data collected using the surveys, questionnaires, observations, sampling and
among other methods of data collection. These statistical tools include meaning, mode, median,
variance, standard deviation, and range. During my analysis, I will be using standard deviation to
analyze the data collected since it is the often used statistical tool to measure factors which
involves business such as risk, market availability, sources of raw materials, the efficiency of the
workers among others. (Clarke, 1994)
The data was collected from the global market, and various methods of data collection
were applied such as an application of online questionnaires and observation. The questionnaire
was the primary method of data collection asked. The finding of the data collected was analyzed
using the statistical tools, and the results were as discussed below. (Johnson, 1999)
The findings of the data collected
Market. The market forces are affected by the demand and supply of the goods in the
market by the customers. The market is bear is the alternative of the bull since the as peak
declines to the smallest market level known as the Troup for a significant level of time. Felt
events are the real events such as the war, earthquakes, political uncertainties and the fall of the
value of the money. Untouchable activities related to the market psychology, where the market
phycology is affected by the real events such as any unforeseen political events may lead to the
fall of the prices which would further increase reactions and the behavior of the investors. If
some of the financial institutions start disappearing their stocks, this fear will grasp, and this
would spread to other investors. (Peters, 1994)

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Interest rates. The variation of interest rate in the onetime rate of return caused by the
fluctuations in the market interest rate. Most of the respondents showed that interest rate affects
the prices of the securities such as the bonds and stocks. Variations in the market rate are caused
by the government monetary policies and the change that occurs in the treasury bills of the
interest rate and remunerations. If high rates are offered, the investors would prefer to have the
other alternative the investment from private sector bond to the public sector bond. If the stock
market is in bad condition, investors would need swift money to the bond market to have the
assured rates. (Gelman, 2014)
Purchasing power. The variation in the return is caused by the loss of ability of money to
buy of the currency due to increase in prices. Inflation may be caused by cost push and demand
pull. Demand-pull means demand for goods and services are in excess surplus. At the full
employment level of factors of production, the economy would not be able to supply more
products in the short term to cater the demand, and this leads to higher prices of the goods and
services. The equilibrium between the demand and supply is attained at the top level of prices.
Cost-push is the rise of the price which is caused by the rise in the prices of the factors of
production such land and labor. High price levels lead to continuous demand for high wages, and
this leads to the spiral effects on the price levels which implies inflation. (Clarke, 1994)
Business operations. Most of the respondents of our survey suggested that this arises
from the inability of a firm to compete it's in competitive edge under the growth and stability of
the economy. The varying of the economy that occurs in the operating environment is reflected
in the operating income and the expected income. The managers should know that this effects
can be internal or external forces which can cause it to happen. (Kettinger, 1997)

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Financial management. It is caused by the change of the income to the equity capital due
to the borrowed money associated with capital structures. Presence of the debts and performance
capital results to the commitment of paying interest. The variation in income cost borrowed
money in risk in highly levered firms is greater than those companies with low livered risks.
Financial leverage is unavoidable as the manager who has to decide on how much to be funded
by equity capital and capital borrowed. (Mingers, 1997)
Another finding which we found in our survey included managerial efficiency,
technological change in production, availability of raw materials, changes in the consumer
preferences and the labor problems. (DiMaggio, 2013)
The results of the finding after analyzing using the statistical analysis tools.
Market. It involves a careful study of the price behavior to determine the type of the stock
with steady growth. The standard deviation and beta coefficient indicate the volatility of the
price. Standard deviation and beta coefficient are variables for stock which are included in price
indices. Looking at the beta values, the investors can gauge the risk factors and consequently
make the wise decision according to the risk tolerance. The investor would be prepared to hold
the stock for a period of ripe benefits of the rising prices in the market. (Peters, 1994)
Interest rate. Investors should hold the investment to the maturity. If the investors sell his
stock in the middle due to the fall of the interest, the capital invested will experience a heavy

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loss. The variance between the time of investment that is the long term and short term basis
should be determined and the decision made during the setting up of the business. The portfolio
manager can invest in treasury bills and bond, and the money can be reinvested in the market to
shoot the prevailing market rates. This shows that investment on short-term investment is more
secure and the managers should make a good decision about the applying short-term basis.
(Gelman, 2014)
Purchasing power and inflation. In this case, the managers should invest in the bond and
debentures with fixed returns. The standard deviation and characteristic linear line indicate that
the inflation can be controlled by ensuring steady production of goods and supply should be
maintained to ensure there is an equilibrium of demand and supply in the market. (Clarke, 1994)
Business and financial factors. To analyze the weakness and the strengths of an industry
where a company belongs we apply the use of standard deviation to measure the risk of incurring
a loss in that certain market using this formula. (Kettinger, 1997)
σ =∑
i=1
n
P {r1−E ( r ) }2
Where
r =return
r1=¿The value of the ith possible rate of return.
N = number of the possible outcome from different rates of return on investment.
E(r) =expected return
P = probability or change that ith outcome or return will occur.

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Standard deviation is the key statistical analysis tool to analyze any business performance
of different years, companies and the industries. It helps the business managers to analyze their
business by relating the variance with different other types of companies and helps them to
identify strengths and the weakness in their business. (Johnson, 1999)
Meaning of these findings to a manager on decision making.
The analysis results acquired from market analysis using standard deviation as a
statistical analysis tool show that the behavior of the market determines the type of the growth of
the company. The manager should be focused on knowing that the market is venturing is not
much competition that he/she will not be able to compete with others. He should venture into the
market where he will perform best without much risk of being removed from the market due to
unable to compete with other organizations. (Mingers, 1997)
The inflation analysis results which was evaluated by the variance based on different
countries which were competing in the same global market and the inflation of the past years and
the probability of occurrence of inflation shortly. The managers should make a sound decision by
entering the market where the rate of inflation is minimal since inflation has the effects of
reducing the purchasing power of the customers hence fewer sales. (DiMaggio, 2013)
Technological failure. When there is a failure in technology, there is a significant risk of losing
many customers to other organizations which produce the same product, but the quality ones
since the technology applied is up to date. Most of the consumers of the products and services
prefer quality even if the prices are more hence competing with such companies will be a big

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problem for this society. Companies should ensure its technology well monitored and updated
every time to ensure that they do not lie in the trap of the technology failing. (Kiker, 2005)
High competition in the market is another problem. It could be due to a low
quality of goods or reduced prices by your competitors. Some of the corporates can use the idea
of lowering costs for their produced goods and services to remove other companies which they
produce similar products out of the market to enjoy market economies of scale. The can also be
market competition due to the change in preference taste by the consumers and prefer the
products of your competitor. (Meade, 1998)
Unsafety and healthy working conditions to the staffs. Some machines can be
hazardous to the working environment of the workers which could cause accidents and harm the
faculties. The place of location can also be unsafe to the workers such as the places where there
are natural calamities such as floods, tsunami, and earthquakes can put the lives of the workers in
danger. The security of the workers can also be a problem with some places such as theft, frauds,
loss of intellectual properties, terrorism and online security and fraud. (Runyan, 2006)
The interest rate analysis shows that venture into the business which is not affected by the
interest rate. The managers should consider in buying of bonds and Treasury bill for a short-term
time since they are not much affected by the inflation and wait until they mature where the return
will be sufficient. The management should decide on venturing in the business where there a not
much affected by interest rates. This was arrived by determining the standard deviation and the
characteristic regression line. (Clarke, 1994)
The analysis on the business and financial aspects results was arrived at using the
standard deviation statistical analysis which showed that the decision to be arrived at is based on

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the success of the company by considering all the possible alternatives of the business and
choosing the best.

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