The value of a Certificate of Deposit (CD or GIC) with a fixed term will be determined assuming it is reinvested at its maturity."
3. Financial implications of TVM
Based on approximate calculi of future values of the money, the population will regulate their investments in order to achieve significant profits. Their actions will have numerous influences upon various work domains and industries suck as banking, insurance industry, governmental actions or retirement plans.
The activities of commercial banks are directly influenced by the value of money in the sense of increase or decrease of the realized transactions with the customers, both private individuals as well as corporate bodies.
When the foreseen future value of the money is expected to increase, so will the deposits made by clients to the banks. Bank customers will deposit more money into their saving accounts in the hope that they will register higher profits due to a favorable interest rate. On the other hand, the individuals will tend to avoid requesting credits, as at maturity, they might have to pay a larger amount of money than they currently need to finance their activities.
In the case of a foreseen reduced future value of the money, the population will require more credits from the bank and other financing companies in the hope that at maturity, the rates they have to pay will be significantly reduced. However, with deposits, the population will tend to avoid them as they will not bring future profits.
In a nutshell, the future value of the money influences commercial banks and credit card financial institutions as follows: a high FVM generates an increased demand for saving opportunities from the population and a decreased demand for crediting opportunities, as such an increased supply of crediting and a decreased supply of saving programs. A low FVM generates an increased demand for crediting from the population (therefore a decreased supply from banks and credit companies) and a decreased demand for saving opportunities from the customers (and an increase supply from the bank).
Insurance companies and retirement plan financial providers are also directly influenced...
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