Exchange rates are the value of one currency in relation to or expressed in another currency. For example, the exchange rate of the U.S. Dollar to the Euro might be $1.43. That means that every one Euro equals 1.43 U.S. Dollars.
Archive for the ‘Needs Link’ Category
Exchange Rates are…
Friday, October 23rd, 2009Why can it be good to borrow money?
Friday, October 23rd, 2009It’s a good question: loans come with interest, so you always have to pay back more than you borrowed. How is borrowing possibly a good idea?
Say you want to buy a house. Houses aren’t cheap, but they’re generally necessary (unless you want to live in your car). Especially if you’re fairly young and just starting out, chances are you probably can’t afford to just drop the full value of that house, in cash, up front, into the seller’s lap. But if you take out a mortgage to pay for the house, you can pay it back a little at a time. True, you’ll end up paying back more over time than if you’d just paid up front, but presumably you’ll be making more money as your life progresses, and then mortgage payments will count for less of your budget.
Just graduated and they’re already hitting you up for an alumni donation? What’s the point?
Friday, October 23rd, 2009“Hello, my name’s Susan and I’m calling you about your beloved alma mater… How about starting with a small monthly donation of $200?”
Sound familiar? Every graduate receives these calls seemingly moments after that graduation cap tassel crosses from right to left. Alumni donations have a large impact on colleges for several reasons and so they are solicited with what may appear to be overzealous enthusiasm. You may wonder how these people expect a new graduate to be able to donate anything. Don’t you need a job first?
Well, while your school is definitely hoping for a sizable check, that’s actually not the main reason for the unsolicited call. A large part of a school’s ranking is based on the rate of alumni donations – the percentage of graduates who give back to their school. By encouraging you to donate, sometimes even as little as $1, colleges are trying to maintain or even boost a significant factor in ratings determination. They also want to get you in the habit of giving.
While the size of your alumni donation right now might not be close to Warren Buffet’s, it still has a big impact on how your school is ranked and your giving patterns in the future.
How does a hedge fund manager actually make money?
Friday, October 23rd, 2009The term “hedge fund” can actually be somewhat misleading – not many hedge funds actually hedge their investments. Hedging is a strategy that reduces the risk of a business transaction. Hedge funds use many different investment strategies, but they often engage in high-risk trading because their goal is to make as much money as possible as quickly as possible, which is different from, say, an index mutual fund that just tries to outperform an index (for example the S&P500). What really distinguishes hedge funds is how hedge fund managers get paid: management fee plus a performance fee.
When is a pig better than cash?
Wednesday, October 21st, 2009For many of the poorest people around the world, holding onto cash is just as difficult as getting their hands on it in the first place. For one thing, lacking food or basic necessities, there are immediate needs that cash will go to right away. Nothing is invested, which makes it harder for a person to make more money and eventually, escape from poverty. Too many hungry children or parents in desperate need of medicine siphon off cash as soon as it appears, trapped in an endless cycle of poverty.
For this reason, many microfinance and poverty-alleviation institutions are making loans of durable goods like pigs, bicycles, or refrigerators rather than cash. These are called in-kind loans. It’s much harder to give away pieces of a pig (until it’s eventually butchered of course), so it tends to last longer – hopefully long enough to grow from a small, inexpensive piglet to a fat hog that will fetch a good price at the market and allow its owner to repay the loan and, hopefully, reinvest the profit.
This isn’t to say that cash loans don’t help – they can save lives – but it’s also important that the people receiving the loan know how and are able to turn that cash into a durable asset that will reap greater returns and profit in the long term.
Overdraft Protection is…
Tuesday, October 20th, 2009Overdraft protection is a service offered by some banks that can prevent you from bouncing checks and incurring fees (not to mention annoying anyone you write checks to). Normally, if you spend more money than you currently have in your account using a check or debit card, your check might bounce or payment might otherwise not go through and the institution you’re paying can charge you a fee (not to mention getting mad and maybe not wanting to do business with you in the future).
If you have overdraft protection, though, your bank will automatically pay the bill on your behalf (usually up to a certain limit) so the people you do business with won’t charge you or get mad. You will, of course, have to pay the bank’s fees for the service, so it’s better to know how much you have in your account before you go on any spending sprees.
A Parent Company is…
Tuesday, October 20th, 2009A parent company is a company that owns a smaller company, called a subsidiary. The parent company can exercise some control over the subsidiary but also provide it benefits, much like a parent does with their children. When you’re a kid, your parents might give you a curfew, but they also do things like buy you food and clothes. Fortunately for kids, however, parents can’t liquidate their children for cash!
What happens when you pay your credit card bills late?
Tuesday, October 20th, 2009When you don’t pay credit card bills on time, your credit score takes a hit, and a low credit score makes your life difficult in multiple ways. Your credit score basically reflects how trustworthy you are when it comes to paying back credit, and any time you need credit or insurance, the lenders involved are going to look at your credit score. A low credit score may be enough reason for a lender to refuse you a loan outright or for an insurer to decide you’re too risky, and even if you are granted credit, it may be at a higher interest rate or with stricter terms and conditions.
Although different companies calculate credit scores differently, paying your bills late is one thing that’s basically guaranteed to lower it. Paying on time, however, has the opposite effect, and the longer you go without missing a payment, the better your credit score looks. Basically, a high credit score tells credit and insurance companies that you’re a responsible person, and they’ll treat you better for it – it’s a way to make a good impression from the start.