cost of money test prep. interest rates going down no information rates will increase lock up...
TRANSCRIPT
COST OF MONEY
TEST PREP
INTEREST RATES GOING DOWN
• NO INFORMATION RATES WILL INCREASE
• LOCK UP CURRENT RATE FOR A LONG PERIOD OF TIME
TIME VALUE OF MONEY
• MONEY RECEIVED TODAY IS WORTH THAN MONEY RECEIVED IN THE FUTURE
• WHY ???
TRUTH IN LENDING ACT
• FEDERAL LAW
• COST OF CREDIT BE DISCLOSED
• TO CONSUMERS
• BOLD PRINT
• LOAN CONTRACT
USURY
• VERY HIGH RATES ON HIGH INTEREST
INFLATION
• WHO BENEFITS?
• LONG TERM FIXED RATE BORROWERS
• WHY ?????
CREDIT UNIONS
• PAY HIGHER INTEREST RATES ON
• SAVING ACCOUNTS
• NOT FOR PROFIT
• GOAL—CONSUMER
• NO SHARE HOLDERS
RULE OF 72
• 72 DIVIDED BY INTEREST RATE
• YEARS TO 2X CASH
• 12% INTEREST
• 6 YRS 2X CASH
RULE OF 72
• I WANT TO 2X MY CASH $10K IN
• 12 YEARS
• WHAT INTEREST RATE DO I NEED TO EARN?
• 72 DIVIDE BY 12
• 6% INTEREST
WHY MIGHT INTEREST RATES DEPRESS STOCK PRICES
• HIGH
• INTEREST RATES
• RESULT IN LOWER BUSINESS PROFITS
• HIGHER COST ON LOANS
FINANCE CHARGE
• THE INTEREST RATE A LENDER CHARGES TO BORROW MONEY
TIME VALUE OF MONEY
• WHAT IS NEEDED???
• INTEREST RATE- CURRENT
• RATE OF INFLATION