Chapter 8 Saving and Investment

Chapter 8 Saving and Investment - 81...

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8-1 Chapter 8:  Saving and Investment Recall: GDP= Y C + I + G + (X - M) Inv = Private Saving  Public Saving
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8-2 Government Budget If T - G > 0  If T - G < 0  For a discussion of the federal budget see: http://www.budget.gc.ca/2008/news-nouvelles/news- nouvelles-eng.asp
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8-3 Also:
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8-4 Financial Markets:  The Bond Market Next we will look at:
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8-5   Future Value o FV(j)= PV*[1 + R] j Example: FV(14) = = = Discounting
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8-6 Problem: Calculate PV: o PV = FV(j)/[1 + R] j   o FV = $100 o R = 5% o j = 1
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8-7 Problem: Calculate PV: o PV = FV(j)/[1 + R] j   o FV = $100 o R =  7% o j =  1
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8-8 Problem: Calculate PV: o PV = FV(j)/[1 + R] j   o FV = $100 o R =  5% o j =  2
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8-9   Interest Rate Determination o Interest rate 
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8-10 The Present Value of a Bond Coupon Payment  Present Value = 
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8-11 Perpetuity o A perpetuity is an annuity whose payments  continue forever o An individual might for example, donate or  bequeath a substantial amount of money to a college to  establish a scholarship fund o A typical situation is that a fund pay out a fixed  dollar amount of scholarship awards each year forever o
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