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Simple Interest - Definition and Calucation
Terms in this set (30)
What are the two basic ways to view economics?
Broad and distant view
What does I=Prt mean?
R- Interest rate (per year)
T- Time (in years or fraction of a year)
When we borrow money we sre expected to pay for using it
What are the 3 components to calucate simple interest
principal, interest rate, and time
What two kinds of time are used in banks?
Exact time and Approximate time
It uses the precise number of days for time of the loan or investment. Assumes that each year has 360 days.
Assumes that each year has 360 days and each month has 30 days.
The Bankers Rule
Is widely used in the United States, and uses the combination of ordinary interest and exact time.
concerned with the status of the economy as a whole.
Gross National Product
defined as a total value of all goods and services production in final form during a specific period of time.
A condition of generally increasing prices. Used for measuring these prices can vary according to the desires of the individual, government, or institution doing the evaluation.
Consumer Price Index
A measure of how much prices have increased or decreased as compared to a baseline years prices. The prices used in arriving at this figure are standard goods and services determined by the evaluator.
Fiscal Policy is essentially the manner in which a government achieves economic objectives through government spending and taxation.
essentially the practice of a government managing the supply of money to achive economic objectives.
A Bull Market
This is when the market is showing confidence. Indicators of confidence are prices going up, market indices like the NASDAQ go up too.
A Bear Market
If the markets fall by more than 20% then we have entered a bear market. A bear market is a market showing a lack of confidence. Prices hover at the same prices the go down, indices fall too and volumes are stagnant.
Stocks are shares in a company. When you invest in a company's stock or buy its shares, you own part of a company. If the company makes money over a long period of time, your stock may increase in value. You could also loose your money because their risky.
How are stocks valued?
Investors determine the price by choosing to buy or sell the stock at a certain price. Prices of widely traded stocks change several times during a trading day.
Considering the fact that stocks as an asset class are riskier investments than cash or bonds, it is critical that you study every company in which you buy stock.
A debt security, by which you are lending money to a government, municipality, corporation, fedural agency or other entity known as the issuer.
Why invest in bonds?
Many people invest in bonds because they provide a predictable stream of income and repayment of principal.
Types of bonds
Zero Coupon Bonds
U.S. Treasury Securities
are issued by states, cities, countries, and other governmental entitles to raise money for financing public projects.
Zero Coupon Bonds
sold at a substantial discount from the face amount
U.S. Treasury Securities
such as bills, notes and bonds-are debt obligations of the U.S. government.
These are issued by private and public corporations.
issued by organizations that do not qualify for "investment-grade" ratings by one of the leading credit rating agencies.
Represent an ownership interest in mortgage loans made by financial institutions to finance the borrower's purchase of a home or other real estate.
A mutual fund that attempts to match the performance of a major market index.
When you are saving and investing for retirement you want to 'set and forget' your investment as much as possible.
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