Section 1.2 Opportunity Costs and Strategies.  Personal resources require management just like financial resources.  You have to make choices how you.

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Presentation transcript:

Section 1.2 Opportunity Costs and Strategies

 Personal resources require management just like financial resources.  You have to make choices how you use your time.  Would you rather complete your homework during free time at school or finish it when you get home?

 You also have to make choices about how you use your money.  Would you buy the $129 shoes or save money? Can’t do both.  Time Value of Money The increase of an amount of money due to earned interest or dividends.

 What you need to know: Principal (PV)  original amount of money on deposit. Annual Interest Rate (IY) Time Frame or Number of Years (N)

 You just deposited $1,000 in a savings account. The bank will pay you 3 percent annual interest. How much interest will you earn if you keep your money in the bank?  Formula: Principal x Annual Interest Rate = Interest Earned  Solution: $1,000 x.03 = $30

 You deposited $50. Annual Interest 4%. Time 1 year. What are the earnings?  Formula: Principal x Interest = Earnings  Solution: $50 x.04 = $2

 What you need to know: Future value is the amount your original deposit will be worth in the future based on earning a specific interest rate over a specific period of time.  ($ $30) x.03 = $30.90  $ $30.90 = $

 You deposit $2000. Annual Interest 5%. Time 3 years. What are the earnings?  What is the future value?  Easiest way? Excel Spreadsheet

 Obtain  Plan  Spend Wisely  Save  Borrow Wisely  Invest  Manage Risk  Plant for Retirement