A. Store $
B. Store $
-savings accounts
-checking accounts
-CD (penalty)
C. Loans $ -car, house, business
Interest - price level for the use of borrowed money
Principal- amount that you can borrow
Types tof financial intermediaries
1. commercial bank (well fargo)
2. Savings and loans Institution
3. Credit Unison
4. Mutual Fund Compares
5. Finance Companies
The Financial System
Assets- Anything plus monetary value owned by a person or business
Financial asset - a paper claim that entitles the buyers to future income from the seller
Physical asset- a claim on a tangible object (example house, car)
Liability a requirement to pay money in the future (usually with interest)
5 major financial assets:
Loans,
Stocks,
Bonds,
Loans backed securities,
and bank deposits
The time Value of Money- a dollar is worth more today than it is tomorrow. you are losing money every second you are not investing it.
Real interest Rate- Real = Nominal interest rate - expected inflation
The intend return on an investment for lending
The rate we get at the bank. The amount of interest that lenders must charge to make a return and adjust for inflation
Future value If you invest (lend) money ti someone it will compound (grow) according to the following equation
FV = PV (1+ i)
I = nominal Interest Rate , t = time
Present Value Is the amount of money I need to invest now, in order to get some amount (FV is known) in the future PV = FV / (1 + i )
Time value of money
:Let V = future value of dollar
P = present value of $
R = real interest rate ( nominal - inflation rate ) expressed as a decimal
I really favor the visual to help comprehend the previous notes stated. Allows for a more in depth explanation.It is made a claim that money is worth more today than tomorrow. Overtime this has become known as true, in your opinion do you think there will ever be a stop to physical money? As we advance in technology, the lack of materialistic things becomes reality, do you see money being one of the possibilities?
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