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closeInterest
Posted by RCampbell on 24 Jun 2012 at 07:04 GMT
Interest was calculated at 4.25%, (the US prime interest rate plus one percent, which is the mean rate for commercial loans of medium risk in the US (http://www.federalreserve.gov/Releases/E2/Current/default.htm, accessed July 2011).
http://plosone.org/article/info:doi/10.1371/journal.pone.0029332#article1.body1.sec2.sec3.p1
Hunting businesses' ability to access so much credit at US prime rates plus one percent seems highly unlikely. The New York Federal Reserve found that in 2010 less than half the small businesses that applied for credit were successful. Due to the risks involved, hunting businesses that are able to access credit will be unlikely to obtain it at rates as low as 4.25%. Current Small Business Administration program loans through major US banks are charging rates of around 9.75% . In Australia current small business loans are attracting 7.5 – 10.8% while in Africa rates are higher still; Grandes and Pinaud (2005) explore why interest rates faced by African businesses and governments are often 8% higher than internationally.
It is not clear how interest is compounded in the model.
The effect of overstating hunting business’s access to credit and understating the interest rate they would pay is to increase the number of financially viable businesses. As the number of businesses considered initially financially viable is overstated, an overstated number of businesses become unviable when the revenue of the industry is reduced under reduced lion hunting scenarios.
See:
http://www.bankofamerica.com/small_business/business_financing/index.cfm?template=sba_financing and http://www.bankrate.com/rates/interest-rates/wall-street-prime-rate.aspx
www.rba.gov.au/statistics/tables/xls/f05hist.xls
Grandes, Martin, and Nicolas Pinaud. 2005. Reducing Capital Cost in Southern Africa. Organisation for Economic Cooperation and Development, OECD Publishing. http://www.oecd.org/document/3/0,2340,en_2649_33731_35647619_1_1_1_1,00.html.