2/21 Lost Notes Financial Institution

Purpose of Financial Institutions

• Store$
• Save$
1. Savings Acct
2. Checking Acct
3. CD
4. Money Mrkt
• Loan $
• Interest - price paid for the use of borrowed $
• Principal - amount that was borrowed

Types of Financial Intermediaries

• Commercial banks
• Credit Unions
• Mutual Fund Companies
• Finance Companies
• Savings + Loans Institutions

Financial Systems

• Assets - what is owned                               Liability - what is owed
• Financial Asset - proper claims that entitles the buyer to future income from seller
• Physical Asset - a claim on a tangible object

5 Major Financial  Assets:

1. Loans
2. Stocks
3. Bonds
4. Loan-backed Securities
5. Bank Deposits

Money Lost from not investing it

Future Value - (FV =PV(1+i)^t)

Present Value -(PV=FV/(1+i)^N)

• Simple interest formula: v= (l+r)^n * p
• Compound interest formula v= (l+(r/k))^nh*p