The Variability of Interest Rates

INTEREST RATE VOLATILITY DOES MATTER
The variability of interest rates directly influences how the public saves and invests, thus having a large impact on the standard of living. As fluctuations of the rate occurs, return on assets become less predictable forcing investors to re-evaluate their original investment decisions, or face the possibility of drastic loss. Those investors with low income are more likely to hold investments with relatively low volatility, ensuring a steady level of consumption. In contrast, investors with a steady level of income and a diverse portfolio can hold much more volatile investments. Any losses can easily be absorbed while holding the high risk/return investments.
Said volatility affects the business firm in a similar fashion as it does the investor. To manage risk firms must watch the changes in the interest rate in relation to the composition of their portfolios.
The Bank of Canada describes interest rates as “represent[ing] the cost of borrow...