lesson 4.1

• Investment


  An asset or commodity obtained with the intention of producing sales or appreciation
• Appreciation


  An increase over time in the valuation of an object
• Investment as a Form of Retirement

  • Any new way of making money encourages you to increase your net worth
  • You are more prepared for any emergency and retirement
• Exchange Rate


  The value of a currency for the purpose of conversion to another
• Benefits of Investing


  • Stay ahead of Inflation
  • Money Making Money
  • Meet Other Financial Goals
• Inflation


  The general rise in prices that arises every year and the decrease in the money's buying power
• Interest Rate


  The amount a lender charges for the utilization of assets expressed as a percentage of the principal
• Annual Percentage Rate (APR)


  The rate of interest usually noted on an annual basis
• Interest rate does not take account of the inflation rate because of the Purchasing Power of Peso (PPP) or the value of money to buy a product/service decrease
• Banks determine interest rates today by the interaction of the money market supply and demand for funds
• Nominal Interest


  Commonly known as fixed interest rate, does not take the increase of commodity into the computation, used mostly by commercial banks for their loans
• Currency


  For the purpose of conversion to another
• Benefits of Investing


  • Stay ahead of Inflation
  • Money Making Money
  • Meet Other Financial Goals
• Inflation


  The general rise in prices that arises every year and the decrease in the money's buying power
• Compound earnings


  Your money works hard to save you from having to work
• Interest rate


  The amount a lender charges for the utilization of assets expressed as a percentage of the principal
• Annual percentage rate (APR)


  The rate of interest usually noted on an annual basis
• Interest rate does not take account of the inflation rate because of the Purchasing Power of Peso (PPP) or the value of money to buy a product/service decrease
• Nominal Interest


  Commonly known as fixed interest rate, does not take the increase of commodity into the computation, used mostly by commercial banks for loans
• Computing Nominal Interest


  1. Interest = (Principal amount X Interest rate) / Time

  2. Monthly Payment without Interest (MPWI) = Principal amount / Time

  3. Monthly Payment with Interest (MPI) = MPWI + Interest
• Effective Interest Rate


  The interest rate received or charged on an investment, loan or other financial transaction owing to the compounding result for a defined period of time
• Computing Effective Interest


  1. Interest = (Principal amount X Interest rate) / Time

  2. Monthly Payment without Interest (MPWI) = Principal amount / Time

  3. Monthly Payment with Interest (MPI) = MPWI + Interest

  4. Remaining Loan = Principal amount - Monthly Payment with interest
• Flat rate


  A predefined fee or payment on top of the value of the purchase, a single fixed fee for a service
• The amount of time or tenure of the loan or service may not depend on the interest rate
• Rent


  The revenue arising from land ownership and other free gifts of nature, represented as the difference between the net return of a producing factor and its supply price
• Rental Business as an Investment Opportunity

  • High Demand for Rentals
  • High Occupancy Rates
  • Affordable Property Price
  • Growth Potential
• Rental Concerns


  • Big Capital Investment
  • Location
  • Population
  • Risk
• Higher capital translates to higher risk because potential losses become greater should the business fail