The focus will be on introducing the functions of money, key components of the financial system, and the determination of interest rates. The major questions that will be discussed include:
a. Determine the money and what does it do for us?
b. Explain how does the payments system work?
c. Determine the price of money? Hint: interest rates. How are interest rates determined?
d. Calculate the relationship among the interest rates, bond prices, rates of return, risk, and time value of money?
Money and Its Functions
Explain how the money supply is measured and the four key functions of money discussed and in the Feducation: Money and Inflation video.
Bond Prices and Interest Rates
Discuss why there is an inverse relationship among the price of bonds and the relevant interest rate. Describe the effect of each of the following upon interest rates and upon the price of bonds:
-Maturity
-Inflation
-Risk