What is the relation between the risk and the interest in money and banking?  thanks?
156726
The main risk in backing is opportunity cost.  Example\nIf you put $1,000 in a saving account that is FDIC insured the risk would be 0, but the interest rate would be low as well. If you put $1,000 in a corporate bond or an uninsured CD, your risk would be higher, but so would the interest rate.  The higher the risk, the higher the return should be.\n\nThe opportunity cost associated with the lower risk is how much return you could have gotten had you choosen a riskier investment.\n\n1,000 in savings = 2 % a year later risk free\n1,000 in CD = 5 % a year later with relativly low risk\n1,000 in Corrporate Bond= 7.5% a year later with medium risk\n1,000 in Blue Chip Stock= 10% a year later with higher risk\n1,000 in tech Stock = 14 % a year later with a chance you could loose all invested moneys.\n1,000 in lottery ticks = millionare or loose it all
979008
You're right... there's really not much of a benefit either way nowadays.  I think when you look at fees charged for services and the interest being paid, it's probably an easy decision.  Some money markets are NOT FDIC insured however... whereas personal checking accounts are FDIC insured.
430366
Compounding when interest builds on something. If interest is charged or paid monthly then the interest compounds monthly.\n\nAnnual % rate is the rate per year. In the example of having a certificate of deposit at a bank, it is the amount that the bank gives you if you were to get paid interest once a year. Generally that number is divided by 12 and paid monthly.\n\nAnnual % yeild is the annual % rate you get when you include the interest that you earn on your interest.
642311
interest-SIMPLE INTEREST
332971
a VERY SIMPLE example ...\n\nif you bought a t-note that was yielding 1% it means you would get $1/yr for each $100 of the note\n\nif interest rates went up to 2% someone would demand a return of $2 for each $100 of the note \n\nif you wanted to sell your note you would get $100 for every $2 worth of yield you handed over (you would have to hand over $200 face value of your 1% bills for only $100 in order for the buyer to get a yield of $2 for their $100 investment)
1132383
Even "high interest" savings or Money market accounts pay less than the interest rate a bank charges for a loan. That's how banks make money. They take in money and pay a low interest rate, and then they lend money out at a higher interest.
1859
Money Market accounts typically offer a much higher rate of return than savings accounts. They invest in super safe securities such as short term bonds and t-bills. They are completely liquid (you can make withdraws whenever). I highly recommend opening a money market account simply because you earn 2% or 3% more than a savings account. They also adjust to the current interest rate much faster than savings accounts which typically move like molasses on a winter day.
139495
Let's define some variables for the equation.\n\nD = monthly deposit ($200)\nr = annual interest rate (10% is 0.1)\nn = compound frequency (12 months in a year)\nA = account balance\ni = compounded interest\n\nLet's start the account this month, or month 0.\n\nA(0) = D\n\nOne month later, you make another deposit and earn some interest. But you only earn 1/12 of the 10% with you existing balance, which is r/12.  \n\nA(1) = D + A(0) + i(1)\n\nwhere, i(1) = A(0) * r/n. Which makes\n\nA(1) = D + A(0) + A(0) * r/n , or\nA(1) = D + A(0) * (1 + r/n ), or\nA(1) = D + A(0)*R, if R = 1 + r/n, but A(0) is D, so\nA(1) = D + D*R\n\nTwo months later, you make another deposit and earn some interest on the balance A(1). Similarly calculating,\n\nA(2) = D + A(1) * R, or\nA(2) = D + (D + D*R) * R, or\nA(2) = D + D*R + D*R^2\n\nKeep on going to three months later, \n\nA(3) = D + A(2) * R, or\nA(3) = D + D*R + D*R^2 + D*R^3, or\nA(3) = D * (1 + R + R^2 + R^3)\n\nFollowing this pattern, k months later, we get\n\nA(k) = D * (1 + R + R^2 + ... + R^k)\n\nNow, let's calculate the general expression (1 + R + R^2 + ... + R^k) in a closed form.\n\nLet S = (1 + R + R^2 + ... + R^k). Multiply R on both sides, we get\nS*R = (1 + R + R^2 + ... + R^k) * R, or\nS*R = R + R^2 + ... + R^k + R^(k + 1)\n\nSubtracting the two equations S*R and S on both sides, we get\n\nS*R - S = R + R^2 + ... + R^k + R^(k + 1)  - (1 + R + R^2 + ... + R^k)\n\nNotice the terms R all the way through R^k on the right hand side are cancelled and only left with R^(k + 1) - 1. So we have,\n\nS*R - S = S(R - 1) = R^(k + 1) - 1\n\nDividing (R - 1) on both side, we get\n\nS = [R^(k + 1) - 1] / (R - 1)\n\nRewriting the account balance at month k,\n\nA(k) = D * (1 + R + R^2 + ... + R^k), or\nA(k) = D*S = D * [R^(k + 1) - 1] / (R - 1)\n\nNow, 26 years make 26 * 12 = 312 months. But since you start with 0, so your k is actually 311. R = 1 + r/n = 1 + 0.1/12, and D = 200. So\n\nA(311) = 200 * [(1 + 0.1/12)^(311 + 1) - 1] / (1 + 0.1/12 - 1), or\nA(311) = 295667.15330119169 = 295667.15 (round to nearest penny)
1113602
You can have as much money in any bank as you want. However it is only FDIC insured up to 100K per bank. They calcultate interest by taking however much money you have x 1.0XX (XX being your interest rate) and thats how much interest you will make in a given year.
195152
All quick money schemes include risk.  The higher the potential profit the higher the risk.
202232
Yield is the actual earning that you get from an investment or deposit or even a loan.Banks give you yield when you put money in their plans and they get yield when you loan money from them.It is expressed in percentage and is usually termed APY.
158774
if it is as i understood\nyou borrow =$10 000\nits profit during one year =$10 000* 0.09 (9%)= $900\nafter one year you must pay= $10 000+$ 900=$10 000 * (1.09)\n\nsimilary for the second year =$10 000*(1.09)^2\nsimilary for the third year =$10 000*(1.09)^3\n\nafter ten years=$10 000*(1.09)^10=$23 673.6367\n\nThe rule F=P*(1+i)^n\nF:Future Value Of Money\nP:Present Value Of Money\ni:Interest Rate During Certain Period (e.g. one year)\nn:Number Of Periods (e.g. ten years)
301814
one answer: currency risk
435918
The amount of cash banks have determined by three variables.  The first is required reserves.\n\nThe Required reserves of money that banks must hold in order to satisfy customer needs.  This is determined by a government agency called: The Federal Reserve or 'The Fed'.  \n\nFor example if the Fed sets the required reserve rate at 20% then banks will have to hold 20% of all deposits.  So if someone deposits $100 and the required reserve is 20% then the bank will have to hold $20 to be available for withdrawal on demand.  100 x .20 = 20\n\nThe second variable that determines how much banks hold is the: \n\nDiscount Rate [the interest at which the Fed loans banks money if they accidentally run below their required reserves] \n\nAnd the: Federal Funds rate: [the rate at which the Fed mandates that banks loan each other money]\n\nIt's profitable for banks to make loans but they don't want to fall under their required reserves otherwise they'll have to borrow money and that gets expensive.  \n\nSo when the Federal Funds Rate and the Discount rate are high they'll keep more excess reserves so their chances of accidentally falling under their required reserves are low and they won't have to borrow money.\n\nWhen the interest rate is low it's cheap to borrow money and banks don't have to worry about falling under their required reserves so much.  So they'll make more loans and have less money in their reserves.  Because if they run under their required reserve ratio because of unanticipated demand [a lot of people want to withdraw money] they can just take out a loan at a low rate and they won't lose too much profit..\n\nThe third variable is the Feds open market operations.  By buying or selling bonds the Fed can influence how much money people deposit in banks and interest rates.\n\nSo those three variables are primarily what determines how much money banks [large and small] have on hand.  Smaller banks are allowed to have a lower required reserve [they aren't required to hold as much money by law] because they don't have the vast resources of larger financial institutions.
316061
The US dollar is backed by the US Government, (not great but it works). The US government, thankfully, is back by its taxing power over the American people (which is VERY good). I don't think you'll have much to worry about. But I won't keep cash laying around not collect interest or working for you. Inflation is what will really eat away your money.
550682
Oy that is a great question.  I take it you taking a risk managment or a derivative course! ;)  Basically you would have to put in functions (functions of interest and volatility variations) for both and then evaluate it accordingly.  It is nearly impossible to do by hand but computer can provide you with some good insight :).  That's when 3D probability that engineers love so much kicks in.  \n\nRival
875371
All simple intrest problems use the simple intrest equation,\n\nI=PRT or PRT=I\n\nWhere\n\nP = principal, the amount deposited or borrowed, in dollars.\n\nR = annual interest rate, in percent, expressrd as a decimal or fraction.\n\nT = time the account is open, in years \n\nI = interest earned, in dollars, during the T years.