Interest Rate

Financial institutions and markets create the mechanism through which funds flow between savers (fund suppliers) and investors (fund demanders). The level of funds flow between suppliers and demanders can significantly affect economic growth. Growth results from the interaction of variety of economic factors, such as the money supply, trade balances, and economic policies, that affect the cost of money – the interest rate or required return. The level of this rate acts as regulating device that controls the flow of funds between suppliers and demanders. In general, the lower the interest rate, the greater the funds flow and therefore the greater the economic growth and vice versa.

The interest rate or required return represents the cost of money. It is the rent or level of compensation a demander of fund must pay a supplier. When funds are lent, the cost of borrowing the funds is the interest rate. When funds are invested to obtain an ownership (or equity) interest, the cost to the demander is commonly called the required return. In both cases the supplier is compensated for providing either debt or equity funds. Ignoring risk factors, the nominal and actual interest (cost of fund) result from the real rate of interest adjusted for inflationary expectations and liquidly preferences – general preferences of investors for shorter-term securities.

In a perfect world in which there is no inflation and in which funds suppliers and demanders are indifferent to the terms of loans or investment because they have no liquidity preference and all outcomes are certain, at a given point in time there would be one cost of money – the real rate of interest. The real rate of interest creates an equilibrium between the supply of savings and the demand for investment funds.

Ex.8. Give the Russian equivalents to the following.

Tax, taxation, taxable income, taxation brackets, tax avoidance, tax base, tax burden, tax evasion, tax exemption, tax-free, tax haven, tax holiday, taxman, tax relief, tax return, tax shelter, lump-sum tax, excise tax, heavy tax, payroll tax.

Ex.9. Match the following expressions with the correct definition.

1. Sums allocated by an organization working capital for for future capital expenditure

2.Ratio of sales of a company b. human capital

to its capital employed

3. Income tax relief c. venture capital

4.The amount provided by ways

of loans d. share capital

5. Factor of production, usually e. risk capital

machinery and plant

6.Total depreciation of the value of f. loan capital

the capital goods in an economy

during a specified period

7.The perceived value of people g.capital budget

and their skills

8. Money to carry on production h. capital turnover

and keep trading

9. Money a company has raised from i. capital allowances

investors who bought shares

10. Money a company borrows to strart j. capital consumption

up a new business

11. Money invested in a project with a high k. physical capital

chance of failure

Ex. 10. What is the English for?

Взимать налог; не платить налоги; облагать налогом; освобождать от налога; платить налоги; подлежать налогооблoжению; снижать налоги; удерживать налоги; уклоняться от уплаты налогов; до вычета налогов; после удержания налогов.

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