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MicroTest 1
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Gravity
Terms in this set (15)
r
interest rate
FV
PV(1+R)
PV
FV(1+R)
consumption
income/price
pi
inflation
temporal with inflation slope
(-1+r)/(1+pi)
Savings
increased inflation and decreasing interest is bad
borrowing
low interest and high inflation is good
Bond Price
X/1+R +...X/(1+R)^T
Consol price
annual payment over inflation
Asset
provides flow of services over time
Rate of return
amount earned that year/value
Asset Max Value Time
Take first derivative, set equal to zero, solve for time
Sell Asset
Rate of Return = interest rate
Equilibrium
R=r
;