rigidity. Banks are compelled by legislation [Basel II and III] to have sufficient cash reserves at any given time, this is so as to avoid banking instability as attested to during the banking crisis of 2008. Commercial banks keep a tiny portion of their demand deposits as reserves, and this is informed by the assertion that depositors seldom withdraw all their demand deposits at a given time, unless there is a bank run of course. This system of fractional reserve aid banks in the creation of demand
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Federal Reserve and Money William L. Reed University of Phoenix Economics 212 Watson Ragin April 20, 2010 The Federal Reserve and Money “Money is the set of assets in the economy that people regularly use to buy goods and services from other people” and money serves three functions as a unit of account, a store of value, and as a medium of exchange. (Mankiw, 2006) A unit of account is unstable over time due to inflation and is unpredictable whereas a store of value must be able to be stored
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The History of Money THE HISTORY OF MONEY From Its Origins to Our Time This was the final draft of the English text of "Une Histoire de l’Argent: des origines à nos jours" - www.autrement.com/ouvrages.php?ouv=2746710306 - published by Autrement in Paris in November 2007 with a few minor changes in the final French text. I am very grateful to Philippe Godard - www.autrement.com/collections.php?col=277 for his editorial support, and to Autrement for allowing me to make the English version accessible
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Fiat money, as it is designated (from the Latin Fiat “Let it be done”), is the norm today, a currency that has no intrinsic use value but, because it is granted the status of legal tender, acquires an exchange value. The value of money is thus, in part, a matter of convention and trust. So is, in a way, the value of Art. In times of a desperate leap towards ‘development’, a pile of money may appear as a blunt statement exposing the inter-connectedness of money’s fluctuating value and the transiency
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2 Valuation 3 The Time Value of Money Contents n n n Objectives After studying Chapter 3, you should be able to: n The Interest Rate Simple Interest Compound Interest Single Amounts • Annuities • Mixed Flows Understand what is meant by “the time value of money.” Understand the relationship between present and future value. Describe how the interest rate can be used to adjust the value of cash flows – both forward and backward – to a single point in time. Calculate both the future
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Week 8 – Net Present Value and Other Investment Criteria The process of allocating or budget capital is usually more involved than just deciding whether to buy a particular non-current asset. We frequently face broader issues, such as whether we should launch a new product or enter a new market. The process of capital budgeting could thus be given a more descriptive name: strategic asset allocation. The capital budgeting question is probably the most important issue in corporate finance. How
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CASE STUDY FIN 501- THE TIME VALUE OF MONEY AND FINANCIAL STATEMENT ANALYSIS DR. JOHN HALSTEAD April 21, 2015 In this case study, I will work through a variety of time value money problems to grasp the concept of how to calculate the present and future value of a lump sum and the present and future value of an annuity. I will also learn how to calculate the present value of a perpetuity. This is important, because this enables me to learn how to determine the value of a typical corporate bond
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Compounding & Future Value Discounting & Present Value Multiple Cash Flows “Special” Streams of Cash Flows » Perpetuities » Annuities Interest Rates » APR versus EAR 3 Lottery Example You just won a lottery which gives you two options: (1) Receive $100 today (2) Receive $120 in one year $100 $120 0 Money Time 1 Which option should one take? 4 2 2 Lottery Example: Future Value If you take money now, you can put them in the
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of present value is so important for corporate finance and is often the very first topic taught in any finance class. Present Value is the process of determining what a cash flow to be received in the future is worth in today's dollars. Therefore, the Present Value of a future cash flow represents the amount of money today which, if invested at a particular interest rate, will grow to the amount of the future cash flow at that time in the future. The process of finding present values is called
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