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I found your post to be very insightful. I agree with you that interest charged periodically
helps depository institutions avoid a lot of risks. The institutions cannot predict the future rates
effectively. By using fixed interest rates on long-term debt, the institutions face the risk of losing
a lot of money. The institutions take the issue of changing rates seriously and mitigate them
through the use of periodic charges based on the current interest rates. It ensures that there is no
loss of funds which could affect operations within the organization. Therefore, the goals for the
institutions are to lock in a spread, mitigate risks and not to depend on the interest rates
movements as you stated.
I really enjoyed reading your post. I agree that it is important for the institutions to value
the worth of the money they currently have more than what they have tomorrow. Therefore, the
consideration of cost, profits, risks and demands is paramount to the institutions to consider
when lending. Changes in inflation and federal fund rates are ever changing and could affect all
the aforementioned considerations in different ways. The changes are uncontrollable risks which
will affect the institution negatively. Through the use of periodic changes, the banks are able to
control these risks and ensure that they do not get out of hand. They can monitor the risks and
ensure that they do not affect them in a negative manner in the long run.
I enjoyed reading your post on Michael Porter’s Five Forces Model. The model is very
effective and has helped many institutions conduct business over the years. However, there are
several limitations that the framework still presents. Some of the limitations I agree with are the
assumption of classic perfect markets, its focus on simple market structures, assumption of static
market structures and its focus on competition. Also, I believe that the model is ineffective when
used on an organizational level rather than analyzing the whole industry. Globalization also
presents a challenge since it’s not easy to keep tra...