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QuizReview.ppt QuizReview.ppt Presentation Transcript

  • Summary Review
    • Part I: 5 lectures & Guide to Personal Finance
    • Part II: Ch’s 1-4, O’Sullivan & Sheffrin
  • Part I
    • Buying a Car: Credit
    • Buying a House
    • Financial Planning
    • Investment
  • Cost of Using a Car for Several Years
    • Depreciation in car’s market value
    • Interest
      • opportunity cost of your money
  • Mortgage Loans/Fixed Rate
    • Pay back the loan with declining balance of principal owed
      • build equity(ownership) slowly
    • Pay interest(price of credit)
      • frontloaded
  • Financial Planning: Meeting Future Needs in Life
    • Family Formation(significant other)
      • term insurance(protection against unforeseen death & loss of earnings)
    • Housing
      • space
      • asset: building equity(ownership)
    • Retirement
  • Financial Planning: Meeting Future Needs in Life(continued)
    • Retirement
      • Old Way: Social Security/Pension Plan
        • insufficient income
      • IRA’s/Employer Plans[401(k);403(b)]
        • supplementary income
  • Investment
    • Budget Your Expenditures
      • Tool: income-expense statement
    • Earn money(income)
      • Market value of your time: human capital
      • Your value of your time: your taste for leisure
    • Pay yourself first(save)
    • Invest: Strategies?(Seems Complex)
      • Focus Your Portfolio Choices:
        • cash: currency & checking account (SURVIVAL)
        • money market funds(Treasury Bills: 13 wk-1 yr)
        • bonds(Treasury Notes and Bonds: 2yr -30 yr)
        • stock(equity) index fund
  • Investment(continued)
    • Invest: Strategies (Simplify!)
      • cash: little interest, but liquid(no waiting for $)
      • money market: more interest, relatively liquid
      • Treasury Notes (3 year or 5 year Note)
        • more risk unless: buy and hold
        • buy and hold(certain): get principal back plus interest
      • Stock(equity) Index Fund
        • market basket of stocks: diversified
        • buy and hold/ betting on growth of 11% per year on average
    • Track Your Wealth: Asset-Liabilities Stmt.
  • Part II: Chapter One
    • Scarcity
    • Production Possibilities Curve
    • Economic way of thinking/Paradigm
      • describe the alternatives to choose among
      • value these alternatives
      • choose the best alternative
  • Part II: Chapter Two
    • opportunity cost
    • marginal principal
    • diminishing returns
    • spillovers(externalities)
    • reality(real versus nominal value)
      • purchasing power
      • example: a $ today is not the same as a $ tomorrow & vice versa
  • Part II: Chapter Three
    • Circular Flow
    Firms Households Income Labor Firms Households Supply Goods Demand Goods
  • Chapter Three (continued)
    • absolute advantage
    • comparative advantage
    Student Abby Student Bobby 1 hour per chapter 1 hour per lab 3 hours per chapter 1.5 hours per lab Both Abby and Bobby are short of time 1 chapter per lab 1/2 chapter per lab Form a study group and trade knowledge Abby reads Bobby hacks Each Specializes
  • Ch. Three ( continued)
    • Role of Government: federal-state-local
      • provide security(safe skies to safe streets)
      • enforce property rights and other laws
      • tax citizens to pay for these goods & serices
      • redistribute income
  • Chapter Four price quantity/year price quantity/year demand/income, other prices price quantity/year demand price quantity/year demand supply