15-1ww: Reading the "Finance Matters" box dealing with General Motors' pricing strategyfowul at the end of the break-even analysis discussion in this chapter will provide a useful background fcf this exercise. Pricing strategies and adjustments are more likely to occur when interest rates are lor than when these rates are high. This is because the finn can borrow at lower rates in the financill marketplace, which offsets the total cost of any pricing incentives offered to potential customers.

b 1.

2.

3.

4.

The Web site www.bankrate.comlustlratehm.asp provides a listing of current major inter·

est rates that are important to both corporate executives and investors. Here you can find: (a)var· 5.

ious lending rates such as the prime lending rate and federal funds target rate,

(b) rates on US, Treasury securities of differing maturities, and

(c) other selected interest rates, such as on long·

term corporate bonds.

Go to this site and inspect the current level of the prime interest rate and compare it to thll rate one year earlier. Has the prime rate increased or decreased from a year ago? Given thii information, and asswning you work for a major automobile manufacturer, would you recom· 1~

mend to your financial executive superior that the firm consider increasing or decreasing any PI pricing incentives aimed at your firm's customers? ce