4.1 All companies that lend or borrow money are subject to interest rate risk. You are required to provide a detailed discussion that defines interest rate risk. (4 marks)

4.2 Each loan or borrowing a company is involved with has its own interest rate risk, but the overall risk to the company of changing interest rates can be affected by many variables that should be analyzed and minimized. You are required to determine the impact of the following variables to interest rate risk:

4.2.1 Length of loan terms (4 marks)

4.2.2 Credit risk (4 marks)

4.2.3 Overall economic climate (4 marks)

4.2.4 Foreign exchange rates (4 marks)

Feb 211.4 (0.8pc July 199.4 (unch Sterling Index(1995-100 INTEREST RATES 16 Base Rate Feb 211.4 (0.8pc July 199.4 (unch Sterling Index(1995-100 INTEREST RATES 16 Base Rate