Professional Documents
Culture Documents
Birth of Money
In 1913 The Federal Reserve Act created the Federal Reserve System, the central bank of the U.S.
It issues paper currency known as, Federal
Reserve notes.
Created in 1933, the FDIC (Federal Deposit Insurance Corporation), insures individual deposits up to $100,000 dollars today.
Money Matters
Liquidity- the ability to be used as, or directly converted, to cash.
Check-yes
Stocks-no
M2 = near money cannot be used as cash, but can be converted to cash fairly quickly
1. savings deposits
2. time deposits= money deposit at a bank that cannot be withdrawn for a certain term or period of time, unless a penalty is paid.(CD, bond)
3. mutual fund/stock
Banking Services
1. Storing money- keep money safe/FDIC insured
2. Save money- pay % interest to depositor -simple interest= interest paid only on principal -compound interest=interest paid on both principal and accumulated interest Principal ex. 2002 $100.00 2003 $105.00 2004 $110.25 5% Int. $5.00 $5.25 $5.51 End of the year $105.00 $110.25 $115.76
2. Interest charged to borrowers= making loans is the largest source of income for banks
deposit in reserves
($30,000)
Example: You have $40.50 in your checking account account. You buy gas at 8:00 AM for $40.00 (the gas station will not report this transaction until midnight when they close)
When the gas station reports your morning fill up, your account will be overdrawn.
You will be charged 3 separate overdraft penalties of $20.00-35.00 each.
9. Account and routing numbers - appear on the bottom of the check in the MICR line
7. Check number - which is printed on the check and appears in the MICR line on the bottom of the check
The high cost of borrowing money Buy now pay later. the American way!
I = PRT
I = interest
P= principal R= rate (convert % to decimal) T=time
Example #1
You try
Example #2
Michelle borrows 5,000.00 at 9% for 3 years from Bank of America to buy a used car.
The cost of borrowing $5,000.00 for 3 years is $1,350.00, the total cost of the used car is $6,350.00
Example #3 Jim borrows $2,000.00 at 6% for 6 years from Chase to buy a washer and dryer
The cost of borrowing the $2000.00 is $720.00, the total cost of the washer and dryer is $2720.00
Formula
MP= P+I
N
MP= monthly payment P= principal I=interest (convert % to decimal) N= number of months the loan is for
Kristy finances a new Mustang for $40,000 from Huntington Beach Ford at 8% interest rate for 4 years
P= $40,000.00 I= (40,000x.08x4) or $12,800
MP= (40,000+12,800) 48
What is Credit?
FICO scores are the credit scores most lenders use to determine your credit risk. Three Credit Reporting agencies score your credit: 1. Equifax 2. Experian 3. TransUnion
YES!
Rates
Actual Cost
Health Insurance
Clothes/shoes/accessories School Expenses (supplies, fees, & supplies) Athletics/Trainers/Gym Membership/Yoga Class Haircuts/nails/pampering/tann ing Eating out (Food NOT eaten at home and NOT with parents) Internet Service TV/Cable Service
$500
$0 $100 $200 $60
$1380