Finances

Brandi Titkos

11/17/15

Prof. Stenman

Financial Management

W3-A1 Discussion

The loanable theory states that rates are determined by supply and demand for loanable funds. The rate can be decomposed into several components: the real rate, the inflation premium, the default risk premium, the maturity risk premium, and the liquidity risk premium (ai-online ). Usually, high inflation relates to high interest rates as lenders need to compensate for the decline in purchasing power of future interest and principal repayments. This is also a the cause in higher costs of doing business and places an overall drag on the economy.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonal basis. Over the last 12 months, the all items index increased 0.2 percent The indexes for food, energy, and all items less food and energy all increased modestly in October. The food index, which increased 0.4 percent in September, rose 0.1 percent in October, with four of the six major grocery store food group indexes rising. The energy index, which declined in August and September, advanced 0.3 percent in October; major energy component indexes were mixed. The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. Advances in the indexes for shelter and medical care were the largest contributors to the increase, with the indexes for personal care, airline fares, recreation, alcoholic beverages, and tobacco also rising. In contrast, the indexes for apparel, new vehicles, household furnishings and operations, and used cars and trucks all declined in thus past October.

Ai-online mention’s Future Value (FV) refers to the amount of cash to be received or paid at a future date. Chase Bank CD’s structure represents the length of time a depositor's money is tied up. CD interest is compounded daily. CD interest may be paid monthly, quarterly, semi-annually or annually and with maturity.  Its...