Chapter 8 Saving and Investment

Chapter 8 Saving and Investment - 8-1Chapter 8: Saving and

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Unformatted text preview: 8-1Chapter 8: Saving and InvestmentRecall:GDP=Y= C + I + G + (X - M)Inv=Private Saving + Public Saving8-2Government BudgetIf 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.asp8-3Also:8-4Financial Markets: The Bond MarketNext we will look at:8-5 Future ValueoFV(j)=PV*[1 + R]jExample:FV(14)===Discounting8-6Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 5%oj = 18-7Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 7%oj = 18-8Problem:Calculate PV:oPV=FV(j)/[1 + R]j oFV=$100oR = 5%oj = 28-9 Interest Rate DeterminationoInterest rate 8-10The Present Value of a BondCoupon Payment Present Value = 8-11PerpetuityoA 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.

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Chapter 8 Saving and Investment - 8-1Chapter 8: Saving and

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