COST OF MONEY

1
COST OF MONEY

• TEST PREP

2
INTEREST RATES GOING DOWN

• NO INFORMATION RATES WILL INCREASE
• LOCK UP CURRENT RATE FOR A LONG PERIOD OF TIME

3
TIME VALUE OF MONEY

• MONEY RECEIVED TODAY IS WORTH THAN MONEY RECEIVED
  IN THE FUTURE
• WHY ???

4
TRUTH IN LENDING ACT

• FEDERAL LAW
• COST OF CREDIT BE DISCLOSED
• TO CONSUMERS
• BOLD PRINT
• LOAN CONTRACT

5
USURY

• VERY HIGH RATES ON HIGH INTEREST

6
INFLATION

• WHO BENEFITS?
• LONG TERM FIXED RATE BORROWERS
• WHY ?????

7
CREDIT UNIONS

• PAY HIGHER INTEREST RATES ON
• SAVING ACCOUNTS
• NOT FOR PROFIT
• GOALCONSUMER
• NO SHARE HOLDERS

8
RULE OF 72

• 72 DIVIDED BY INTEREST RATE
• YEARS TO 2X CASH
• 12 INTEREST
• 6 YRS 2X CASH

9
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

10
WHY MIGHT INTEREST RATES DEPRESS STOCK PRICES

• HIGH
• INTEREST RATES
• RESULT IN LOWER BUSINESS PROFITS
• HIGHER COST ON LOANS

11
FINANCE CHARGE

• THE INTEREST RATE A LENDER CHARGES TO BORROW MONEY

12
TIME VALUE OF MONEY

• WHAT IS NEEDED???
• INTEREST RATE- CURRENT
• RATE OF INFLATION