The Effect of Declining Interest Rates on Leveraged Investments

When he's told it's 8%, it's full speed ahead. Running 10% on 3 quarters of borrowed capital at 8% leverages the return on the other one quarter, enticing banks to compete for a 7% interest rate instead. The investment becomes even more profitable with a 19% levered return. Declining interest rates benefit the profitability and market value of the company. This success is attributed to private equity and other levered strategies. The prolonged decline in interest rates is likened to a moving walkway at airports, where walking at your normal pace enables rapid progress.