Edexcel Business A Level Revision

Interest Rates - is the price of borrowed money. Getting a loan will mean repaying with interest. If you borrow £10,000 at an interest rate if 5%, the repayment will, by the end of the year, be £10,000 + £500 (5%) i.e. £10,500. Interest rates vary depending on the level of risk involved in the loan. At any one time there are a variety of different interest rates operating within the external environment; for example: Interest rates on savings in bank and other accounts Borrowing interest rates Mortgage interest rates (housing loans) Credit card interest rates and pay day loans Interest rates on government and corporate bonds   Interest rates increase… Interest rates decrease… ·        Businesses are less likely to borrow money expand ·          Investment may increase; existing businesses may expand ·          Investment may slow; there may be fewer new start-ups and slower growth in existing businesses ·         

Exchange rate - is the price of one currency expressed in terms of another e.g. £1 = $1.65. This means that an American would need to pay $1.65 to buy each £... or, we would need to pay 61p to buy each $. Most exchange rates 'float', so their price (exchange rate) may go up or down. If the exchange rate goes down, there is depreciation . If it goes up, there is appreciation. Exchange rate of the £ What happens…? £ Rises   ^ If the exchange rate of the pound changes from £1 = $1.75 to              £1 = $2.00, the pound is said to be ‘stronger’ or has ‘risen’. The correct term is “ appreciation” . Each pound can now buy more dollars than it did before. £ Falls   v If the exchange rate of the pound changes from £1 = $1.75 to              £1 = $1.50, the pound is said to be ‘weaker’ or has ‘fallen’. The correct term is “depreciation”. Each pound can now buy fewer dollars than it did before.   Much will depend up