Question
In 1992 interest rates in Zimbabwe rose to an all time high. To what extent and in what ways are company financial policies and investment plans likely to be affected by the high interest rates Answer
According to Thomas E Stitzel interest rates are the prices of credit,the cost of money,the earning rate on financial assets.It can also be defined as a fee paid on borrowed capital.

Generally speaking, a higher real interest rate reduces the broad money supply. The "real interest rate" is the nominal interest rate minus the inflation rate. Zimbabwe continues to have negative real interest rates. These rates discourage investment and production but aid undesirable levels of speculation and in turn aid and abet inflation.For example in 1992 because of high interest rates companies like the GMB could not be able to supply maize in such a way that we had donors from USA donating yellow maize(Kenya). Gearing is fundamental analysis ratio of a company's level of long-term debt compared to its equity capital. Gearing is expressed is percentage form. If you have taken out a loan to fund your investments, such as a margin loan to invest in managed funds or a mortgage to buy direct property, increases in interest rates will increase your loan repayments Interest rates have an effect on consumer and business confidence. A rise in interest rates reduces the net return to investment thereby discouraging investment; it makes firms and consumers less willing to take out risky investments and purchases. Therefore, higher interest rates will tend to reduce consumer spending and investment. This will lead to a fall in Aggregate Demand According to the quantity theory of money, increases in the money supply lead to inflation. This means that interest rates can affect inflation. Interest is compensation to the lender for foregoing other useful investments that could