Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
Interest Sensitive Stock
A stock whose value is likely to increase or decrease substantially due to changes in interest rates. Most interest sensitive stocks represent publicly-traded companies with high rates of long-term debt. These companies' stocks decrease in value when interest rates rise because the higher cost of borrowing may result in lower profits and dividends. Conversely, their stocks rise on lower interest rates. For this reason, utility companies tend to have interest sensitive stocks.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
A stock whose price tends to move in the opposite direction from that of interest rates. Interest-sensitive stocks include nearly all preferred stocks and the common stocks of industries such as electric utilities and savings and loans. A common stock may be interest-sensitive either because its dividend is relatively fixed (as with an electric utility) or because the firm raises a large portion of its funds through borrowing (as with a savings and loan or a commercial bank).
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.