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Exam Notes Economics GCSE Essay

Annual Equivalent Rate (ARE) shows the percentage of compound interest that would be paid on your savings once a year if you didn’t withdraw or add anything. The ARE is the official rate for savings accounts, and allows you to compare rates fairly. You might also see the ‘Gross’ interest rate shown – which will be less than the ARE because it doesn’t show compound interest, Just the flat rate of interest you’d get for the original amount you saved.

PAR (borrowing) Annual Percentage Rate (PAR) shows the percentage you would have to pay on the money you borrow over the time it takes you to pay back the full loan. This is broken down into a rate per year. PAR is interest and any additional fees or charges added together. This means it’s a true reflection of what the debt will cost you, but it does mean you don’t know how much of the PAR is interest, and how much is made up of charges.

Isis (Individual Savings Accounts): can be used for savings, Just like a deposit account, but with a big advantage: you won’t pay tax on the interest you earn, or on any capital gain you make. Regular

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savings account: you pay a regular monthly amount into the account and are likely to earn more interest than a standard savings account. Standard savings account: more flexible than a regular savings account as you have instant access to your money, but the rate of interest will be lower. If you are a tax payer then you will pay tax on both these accounts.

National Savings and Investments offer tax-free products like Premium Bonds and children’s savings accounts. These are backed by the government. Stocks and shares: a stock is a stake in a company. If you buy a share of stock you are investing in the company and so if the company does well your investment allows you a share of the profit through a payment called a dividend. Of euros the value of the shares will fall if the company doesn’t do well. Stocks and shares Isis: these are also a way of investing money.

The customer doesn’t pay tax on the capital gain they make but should be prepared to leave their investment for a few years- especially as the value of the shares and any income from them can go down as well as up. Bonds: companies and governments issue bonds so that they can raise the money to fund specific projects. If you buy a bond you are loaning your money to the company or government. What’s a loan? This is an advance of money from a lender to a borrower over a set period of time. The borrower must repay the loan, usually monthly, with interest.

There are different Exam Notes Economics GEESE By allied think about: -The amount of money you require -The Annual Percentage Rate you are offered (PAR) -How much you can afford -How much time you will need to pay it back Interest Interest is a payment you pay or receive in exchange for the use of money over time. You can earn interest by keeping your money in a bank, but pay interest when you borrow money. The difference between a secured and unsecured loan If a borrower takes out a secured loan they are putting up any property they own as security to the lender if they are unable to make the payments.

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