Task: The DOW went up over 400 points on Tuesday. Why? What did The Federal Reserve do to encourage the market to go up?
The DOW went up over 400 points on Tuesday because the Federal Reserve degraded short-term interest rate for the sixth time in the past six months on Tuesday as its continuous attempt to strengthen the economy. The central bank lowered its federal funds rate the rate it charges banks for overnight loans by three-quarters of a percentage point, to 2.25 percent, and left the door open to additional rate cuts in the months ahead though it was one of the biggest one-day rate cuts in decades, investors had been betting heavily that the Fed would cut its key rate a full percentage point in response to strong evidence that a recession has begun and to the deepening crisis on Wall Street. In order to ease tension amongst a close, not a recession in the stock market investors were expecting a full percentage point in regards to the possible recession and financial crisis that the country is facing right now that is why the Federal Reserve plans to give $200 billion dollars to the market.
Thursday, March 27, 2008
Wednesday, March 19, 2008
Compound Interest and The Rule of 72
Task: Explain, in your own words the concept of 'compound interest' and 'the rule of Use examples.
Compound Interest- is interest that is paid on both the principal and also on any interest from past years. It’s often used when someone reinvests any interest they gained back into the original investment. For example, if I got 15% interest on my $1000 investment, the first year and I reinvested the money back into the original investment, then in the second year, I would get 15% interest on $1000 and the $150 I reinvested. Over time, compound interest will make much more money than simple interest.
Formula:
M = P( 1 + i )n
M is the final amount including the principal.
P is the principal amount.
i is the rate of interest per year.
n is the number of years invested.
Example:
Let's say that I have $1000.00 to invest for 3 years at rate of 5% compound interest.
M = 1000 (1 + 0.05)3 = $1157.62.
You can see that my $1000.00 is worth $1157.62.
The Rule of 72- is a rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.
Example:
$100 invested at 6% compounded annually would double to $200 in approximately 72 / 6 or 12 years.
Compound Interest- is interest that is paid on both the principal and also on any interest from past years. It’s often used when someone reinvests any interest they gained back into the original investment. For example, if I got 15% interest on my $1000 investment, the first year and I reinvested the money back into the original investment, then in the second year, I would get 15% interest on $1000 and the $150 I reinvested. Over time, compound interest will make much more money than simple interest.
Formula:
M = P( 1 + i )n
M is the final amount including the principal.
P is the principal amount.
i is the rate of interest per year.
n is the number of years invested.
Example:
Let's say that I have $1000.00 to invest for 3 years at rate of 5% compound interest.
M = 1000 (1 + 0.05)3 = $1157.62.
You can see that my $1000.00 is worth $1157.62.
The Rule of 72- is a rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.
Example:
$100 invested at 6% compounded annually would double to $200 in approximately 72 / 6 or 12 years.
Subscribe to:
Posts (Atom)