Part $1.$ Forecasting Interest Rates.

For this exercise you need to choose a country of your operations, except for US and Canada

As the treasurer of a manufacturing company, your task is to forecast the direction of interest rates. You plan to borrow funds and may use the forecast of interest rates to determine whether you should obtain a loan with a fixed interest rate or a floating interest rate.

Using any available resources determine:

Expected growth in the world economy

Expected economic growth of your country

Expected levels of inflations

Changes in monetary policy

Changes in fiscal policy

Changes in foreign flow of funds and expected movements in foreign exchange

Any other factors that you think might affect the demand and supply of loanable funds in your country.

For each of these factors provide at least two sources that support your conclusion.

Given the preceding information, assess how the demand for and the supply of loanable funds would be affected, if at all, and predict the future direction of interest rates.

You can obtain a one$-$year loan at a fixed rate of $8$ percent or a floating$-$rate loan that is currently at $8$ percent but would be revised every month in accordance with general interest rate movements. Which type of loan is more appropriate based on the information provided?

Assume that the US interest rates have abruptly risen just as you have completed your forecast of future interest rates in your country. How might this specific situation place pressure on the interest rates in your country? Considering this situation along with the other information provided, would you change your forecast of the future direction of the interest rates in your country?