NOTES INTEREST RATES, INVESTMENTS, & DEBT. Simply put…the cost of money This amount changes...
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Transcript of NOTES INTEREST RATES, INVESTMENTS, & DEBT. Simply put…the cost of money This amount changes...
NOTES
INTEREST RATES, INVESTMENTS, &
DEBT
Simply put…the cost of money This amount changes EVERYDAY
Consumers, businesses, and governments that borrow money are aff ected by interest rates. Saver/Investor – EARN interest money Borrowers – PAY interest money
Common Types of Interest Rates Prime Rate – rate banks make available to their best customers Discount Rate – rate banks are charged to borrow from the Federal
Reserve Mortgage Rate- the amount consumers pay to borrow for a new home Certificate of Deposit(CD) Rate- rate awarded for saving your money
INTEREST RATES
Investment activities promote economic growth
Capital Projects – business spending for items that will be used over a long period of time.
Land, buildings, equipment
Comes from 3 Sources Personal Savings
The money we save in personal accounts helps fund business loans for capital project.
Low Saving in the US causes concern for the future The Stock Market
Stock – represents ownership in a company Companies issue stock (partial ownership) to raise money
The Bond Market Bond – debt for a company…basically an IOU If you purchase a bond, you lent the company money
They will pay you back plus interest
INVESTMENTS
Borrowing by consumers, businesses, and government also aff ects the economy. Consumer Debt
Credit card debt, home loans, auto loans Business Debt
Loans, bonds, mortgages Government Debt
Federal, state, and local services cost $ Budget surplus – government makes more than it spends’ Budget deficit – government spends more than it makes National debt – total amount owed by the government
DEBT