Economics first test of quarter 4 study guide Part 1

Time Value of money:

• The concept that money is worth more than money later.

• The time value of money is constant and does not change over time.
• The concept of time value of money does not apply to financial decisions.
• A dollar today is worth less than a dollar in the future.

Saving Options include:

• savings account

• buying a new car
• CD

• credit card debt
• Money Market

Investment options include: (2)

• Trusts

• annuities

• Risk management
• Diversification
• Retirement plans

Investment options include:

• Stocks and Bonds

• Gov't savings bonds

• Treasury securities

• Mutual Funds

• Real estate

Present Value - answer's the question:

• If I need to have 100 dollars from now, how much money do I need to invest now?

• If I need to have 200 dollars from now, how much money do I need to save now?

Future Value - Answer's the question:

• If I save 100 today how much money will I have in a year?

• If I save 100 today how much money will I invest in a year?

When choosing to save or invest consider:

• liquidy

• convenience

• Focus solely on short-term liquidity needs
• risk

• Potential Reward