Transcript Lecture 3 - GEOCITIES.ws

Investing 101
Lesson 3
Economic Influences
Review!? Again!
What is a bond?
What is a coupon?
How big is the bond market?
How long is the life of a bond?
What is one risk of purchasing a bond?
Does anyone have anything to
share?
Stock update?
Anything special happening in life?
Anyone have any questions on unrelated
random financial topics?
Main Teaching Points
Supply and Demand
GDP
Consumer/Producer surplus and reservation
price
Interest rates
Exchange rates
Adam Smith
Author : Wealth of Nations
Theorizes of an invisible hand which
drives the market
The self interest of people will create an
efficient market.
Public goods need be provided by the
state (i.e. Defense, Policing etc)
Supply and Demand
GDP
All goods and services
PRODUCED and sold in a
fiscal year.
Does NOT include second
hand goods.
Measurement of growth.
GNP≠GDP
Good To Know
Interest Rates!
Why do they exist???
Why do they change??
What do they effect when they change?
BREAK!
Pick someone you have not spoken to yet and
explain something you learned to them. 10 min
break.
Interest Rates
A product of the governments need to
change the amount of money in the
system.
Governments need to help and curb the
growth of GDP.
How the Gov’t controls inflation.
Bank Of Canada
Banker for the Gov’t
of Canada
Lender of last resort
for chartered banks
Excellent place to rob
Interest rates and the Money
Multiplier
Banks
Financial intermediaries
Between the users and loaners of funds
Make money many ways, mainly in loans.
Levered borrowing.
Why Do Rates Matter?
Changes in rates change things:
The cost of borrowing for new investment and
growth of business.
The PV of Bonds.
The amount Loanable money supply.
The VALUE of our currency……
Exchange Rates
The rate at which one
currency can be
exchanged for
another.
First you buy the money
“Boom Boom” then
you buy the goods
“Boom Boom)
Fiscal Policy & Monetary Policy
Monetary Policy deals with the changing
of interest rates and control of money
supply.
Controlled by the Director of the BOC
Fiscal Policy deals with the taxation of
individuals and businesses .
Controlled by the Finance Minister.
Questions?
Extra
Facts about the BOC
Balance of Payments
Trade Deficit.
US interest rates