Why A Hospital 's Bond Rating Is Important

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The four fundamental factors that affect the supply of and demand for investment capital, and hence interest rates, are productive opportunities, time preferences for consumption, risk, and inflation. Explain how each of these factors affects the cost of money. In your discussion, explain why a hospital 's bond rating is important and describe the different levels. (You can use any bond rating agency for analysis).

Productive opportunities are the supply and demand of capital are based on the business 's profitability. The higher the profits the higher the interest rate. Conversely , the lower the profitability the lower the interest rate. The ability to borrow money is enhanced if the lender perceives the business as profitable and the risk is lower. Time preferences are based on their time for consumption and solely by personal preferences. This is dependent on the needs of the investor. The basis of this is if the investor wishes to save his money for the future, that investor may accept a lower return for future consumption. An investor who has the need for high consumption (needs money in the short term), will lend the money only if the interest rate is high. The needs of the investor will play into the ability for a business to borrow money. If investors need long term, future returns, then interest rates would lower, if the investor needs money in the short term the interest paid to attract the investor and their capital will need to be higher. Risk is based on

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