Impact of Discount rate and Stock Price on LT loans

Abstract

Interest rates are the main indicators of economic growth of a country. Interest rates directly affect the credit market (loans) because higher interest rates make borrowing more costly. By changing interest rates, the Fed tries to achieve maximum employment, stable prices and a good level growth. As interest rates drop, consumer spending increases and this in turn stimulates economic growth. In this research paper I have highlighted the impact of discount rate (which directly effects interest rates) and stock prices on long term Loans. In order to determine a clear picture statistical tool is used. This research will help us to find out the reliability of discount rates & stock price which will be helpful for the predictors of banking sector in Pakistan. This research will also be helpful for those companies who seek for Long term loans. The study is significant in a manner that it highlights the major aspects involved in the determination of interest rates and its impact in the long term loans. These long term loans are taken from commercial banks, multinational corporations, Private businesses, Business ventures. The whole research was done on the by taking the data these selected variables over the period of five years and it was entirely based on a sample of companies that are publicly quoted in Pakistan. The main empirical findings and above statistics used suggest that there is a positive relation between our selected variable. It means if the discount rate increases by central bank then the value of long term loans provided by commercial banks will also get increased. Therefore, the findings suggest that there is a co-relation between the interest rates and stock prices.