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Unformatted text preview: 81Chapter 8: Saving and InvestmentRecall:GDP=Y= C + I + G + (X  M)Inv=Private Saving + Public Saving82Government BudgetIf T  G > 0 If T  G < 0 For a discussion of the federal budget see:http://www.budget.gc.ca/2008/newsnouvelles/newsnouvelleseng.asp83Also:84Financial Markets: The Bond MarketNext we will look at:85 Future ValueoFV(j)=PV*[1 + R]jExample:FV(14)===Discounting86Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 5%oj = 187Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 7%oj = 188Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 5%oj = 289 Interest Rate DeterminationoInterest rate 810The Present Value of a BondCoupon Payment Present Value = 811PerpetuityoA perpetuity is an annuity whose payments continue foreveroAn individual might for example, donate or bequeath a substantial amount of money to a college to establish a scholarship fundoA typical situation is that a fund pay out a fixed dollar amount of scholarship awards each year foreveroThe initial amount used to establish a perpetuity is sometimes called an endowment...
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This note was uploaded on 10/21/2010 for the course ECON 102 taught by Professor ? during the Fall '08 term at Waterloo.
 Fall '08
 ?
 Macroeconomics

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