When we started compounding, at first you owed me 2, just when

It'll have some interest rate, let me make something up, maybe it's a 7 loan.

Remember, this is the annual interest rate but this is an overnight loan.

Traditionally, when the fed is more focused on short term interest rates, on overnight borrowing rates between banks, it will use these to buy shorter term debt that increases the amount of currency out there the amount of dollars out there, and so it will

Now it might make a little bit more sense if we go to the next period.

Our profit here, if we just take the number that we have here,

let's say, let's do the yield curve for treasuries, maybe it looks something like this.

Let me draw this yield curve right over here, so this is maturity on the horizontal axis, and this is yield, and I'm gonna draw the yield curve for treasuries.

Money lenders are enjoying a profitable period.

And if you started with no cash your cash at the end of period,

Let's get an open ticket.

Then after the next period, after six months, you'll owe me this p, 50.00, plus the interest rate divided by the number of periods in the year.

In the last video, I hopefully showed you that if I borrowed P dollars, and I borrow it for a year, and you were to charge me an interest rate of r, or you could say 10r , then at the end and we were to compound continuously.

lower the interest rate for people buying and selling dollars, or I should say borrowing and lending dollars, not buying and selling.

This is actually the power of compounding interest.

How many days?

So I'm going to pay a little over 4,000 a year in interest.

It has 1 billion of loans outstanding.

That's 100 , right?

It has many benefits.

So how do you do that?

And we raise that to the n power.

Im in too new things, cutting edge Hip hop. Experimental stuff Big still into the Golden Age.

Or what you think the real interest will be after you take into account people pre paying their mortgage, people defaulting on their mortgage, and other things

We all have heard of it.

The one from my mom does the same thing.

It takes 30 years to chip away at the whole thing.

I also want 100 of that.

Next Period

Next year

Well the first thing that you would do is that you would lower the

We borrowed money at high interest.

Duration

Direction

Period

Oh, my rate right.

So interest I don't know what the actual formal definition, maybe I should look it up on Wikipedia but it's essentially rent on money.

So let me draw this.

Show timespan of

Period Definition

So this is equal to e to the r power.

In six months, you pay 1.50, right?

And he has to give me 10 interest every year.

Here we grew the money by you could say our yield, a 5 yield, or our interest.

Interest on loans is high at present.