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Wednesday, May 03, 2006 


Today Mr. K talked to us about some things.

You can have a Decreasing Investment or an Increasing Investment.
Decreasing is something like a car where you're paying.
Increasing is something like an RRSP, where you're getting money.

Three types of Financial________ (i forgot what they're called, so if someone remembers please let me know and ill edit this)
-RESP - Registered Education Savings Plan
-TBill - Treasury Bill
-GIC - Guarantee Investment Certificate

Three types of Risk Investments:
High- Where you invest a lot of money, but there's a chance that you can loose it all. Ex. Investing on someone who is doing an oil dig.
Medium- Ex. Investing on something from Apple.
Low- Investing a low amount of money. You may not get much back from interest but you're guaranteed to get your money back.

Investment Portfolio
Where you invest over several banks in all three types (RESP, TBill, GIC), and in all three risks (High, Medium, Low).

Effective Interest Rate
The Interest Rate that you would need to get the same amount of money (future value) if you only compounded once.

A bill for a credit card indicates an Annual Interest Rate of 18.5% and a Daily Interest Rate of 0.05054%. What is the effective rate?

We'll use $100 for a principal value as an example.

So on your TVM Solver:
N = 1
I% = 18.5
PV = -100
PMT = 0
FV = (Alpha Solve) = 120.3161266
P/Y = 1
C/Y = 360
PMT: Begin

Now that we have the Future Value or the money we'll get, we can get the Effective Interest Rate by changing C/Y to 1, and Alpha Solve on I% :

N = 1
I% = (Alpha Solve) = 20.31612664
PV = -100
PMT = 0
FV = 120.3161266
P/Y = 1
C/Y = 1
PMT: Begin

So the Effective Rate would be 20.316%.

Homework: Page 171 #1-7

Next scribe: Nik # 1/2

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Really good scribe post Allan!

Good detail, excellent use of colour, and clearly laid out.

Keep up the good work!

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