Interest and Investment

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Presentation transcript:

Interest and Investment “Make dat money…”

Interest: What you need to know Interest- is the cost of credit Principal-is the amount borrowed Collateral-property that is used to secure a loan Finance Charge-the amount of interest paid stated in a dollar amount Prime Rate-is the interest rate charged by major banks to their “best customers”

Good vs. Bad Interest Good Interest Bad Interest Money that the bank pays you for some type of investment Bad Interest Money that you owe a bank for borrowing from them (a loan)

Investments Why would people choose to engage in risky behavior with money? To make their investment grow What is an investment? Way to make/save money

Four Factors Tied to Investments Safety Reward Ease of getting cash Ease of opening an account

Investments: Things to Know Investment Return The money you make off the interest Maturity Fixed amount of time needed to make the interest accumulate FDIC Federal deposit insurance corporation which insures up to $250,000 of your money Risk The uncertainty that you will receive the expected return

Five Types of Risk 1. Financial Liquidity Fraud Market Price Inflation No return Liquidity Ability to get to your money Fraud You become the victim Market Price Prices will drop Inflation Money looses value

Pyramid of Risk and Reward “The higher the risk, the higher the potential reward” Stocks Real estate Bonds Savings