4.1 – Investments, Interest Rates, and Rental Concerns of Filipino Entrepreneurs

•Investment

Asset or commodity obtained with the intention of producing sales or appreciation

•Appreciation

increase over time in the valuation of an object

Exchange Rate

value of a currency for the purpose of conversion to another

Inflation

general rise in prices every year and the decrease in the money’s buying power

Stay ahead of inflation

• BENEFITS OF INVESTING

• Inflation – general rise in prices every year and the decrease in the money’s buying power

•Investment as a form of retirement

• BENEFITS OF INVESTING

• Any new way of making money encourages an increase in net worth

• You will be more prepared for any emergency and retirement with investing

Money Making

• BENEFITS OF INVESTING

• Investing for the long term provides more options for your income to grow- your earnings compound with time

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

Meet other financial goals

• BENEFITS OF INVESTING

• Getting other methods of earning allows you to accumulate cash easier

Interest Rate

Amount a lender charges for the utilization of assets expressed as a percentage of the principal

- Usually noted on an annual bases referred to as the annual percentage rate

1. nominal interest

2. effective interest rate

3. floating rate

3 types of Interest rate

Nominal Interest

• 3 types of Interest rate

• ‘Fixed interest rate’

• Does not take the increase of commodity into the computation; used mostly by commercial banks for loans

Interest = ( principal amount x interest rate / time)

Interest formula

principal amount/ time

Monthly Payment no interest

MPWI + Interest

Monthly Payment with Interest

•Effective Interest Rate

• type of interest rate

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

Principal amt - MPI

Remaining loan formula

Floating Rate

Also called ‘dynamic rate’

- Interest rate based on a bench mark (Consumer Price Index or CPI) such as the ForEx or the PSE