All language subtitles for 3_foda0010sasdasd

true increase that we've seen
in GDP that year. So guys

for you and actually makes you
understand why most economists

may you have may not be able to
buy as much as it did before.

flaunt and say oh yes our GDP
has increased they will look at

thing as what we've just seen
with the interest rates. The

to GDP you're talking about
gross domestic product that's

nominal because they'll say oh
yes this how much has increased

real GDP data actually factors
in that inflation and shows the

without factoring in inflation.
But in reality it's the same

please take notes as
particularly this lesson this

concept as GDP data. So you've
got real GDP data and then

nominal interest rate. So guys
take care and I'll see you in

interest rates are increasing
so in case you are struggling

much we can actually make from
the interest. It's the same

example right here. I really
hope this does break it down

actually look at just the real
interest rate rather than the

means in actuality your $10$5,
000 is actually own can only

need to look at how much
inflation has gone up by to

quite attractive when this
deflation occurring that means

the productivity of an economy.
Um So now an economy might to

you've got the nominal GDP
data. Of course when it comes

Let's just say inflation went
up to by 3% that year. That

will affect your purchasing
power of course. The money you

to grasp the concept because it
can be a bit complicated at

going through you buy a bond
and on its front cover it says

a real interest rates to get a
proper understanding of how

the listed amount of years.
Let's say after one year, it's

now worth $105, 000. But think
about it, is it really? You

calculation of the real
interest rate. Now let's look

buy 1 03 thousand hundred and
3000 dollars of products from

that this bond will will mature
5% a year so you buy this bond

at $a 00thousand which will
exploit which will expire in

first let's just use the
example that I'm going to be

the previous year. Now this is
why we look at interest rates,

understand your purchasing
power. Now because of this, it

there we go if inflation is
lower and you're calculating

Of course like like we
mentioned previously bonds are

higher that means that the real
interest rate reduces in price.

much is got how much prices
valued or devalued in that

looking back at that as well
that means if inflation rate is

you're in an inflationary
condition that means inflation

means that you're going to have
a higher real interest rate

Investors will make smart
assumptions to understand if

at the two different conditions
where you would actually

it's a good investment. Let's
look back at this equation. If

inflation is obviously higher
therefore you get a lower real

inflation is a lot lower
therefore higher real rates so

the real interest rate let's
just keep this standard that

rate so look for a better
investment elsewhere obviously

therefore it's good to invest
into that bond however if

year.

the investment into the bond
for is actually worth it and if

inflation is lower that means

So why do investors care about
the real interest rate?

it will make a good return on
investment through the

consider buying that bond. So
in a deflationary condition

bond. Um the interest rate the
inflation rate is of course how

value that's the the front
cover let's just say of the

would have seen last year. It's
actually only 7. 5%. So if we

one year. However, due to the
economic you know the economy

So the nominal interest rate is
the one that you see on face

rate is the nominal interest
rate minus the inflation rate.

increased in value by 10% and
that's what you'd be paid back

it's it says it by whether it
be 30 years whatever it may be.

context. So the real interest
rate. Think of it like this.

what does that mean? That means
although your bond has

at the time inflation at in
that year was 2. 5 percent. So

Imagine a bond has a 10%
nominal yield but the inflation

the actual purchasing power of
that isn't the 10% that you

were to put that into an
equation. The real interest

that bond is going to increase
by 10% year on year whenever

that has a real interest rate
of only 7. 5%. So what does

So it says ten percent but
let's just say it's 10% within

this mean? That bond on the
face value it says that your

but the inflation rate is 2. 5
percent. Then you have a bond

learning about these things.
But just to put it into

course it was like that for me
as well when I was originally

then the effective interest
rate is it includes the impact

has been redeemed. Nominal
interest rate. The nominal

the real interest rate accounts
for inflation. Given a more

is what a lot of economists use
especially in their data. So

lenders without accounting for
any other economic factors. And

compounds semenually.
Increasing the overall return.

is what you're going to be
hearing a lot in the news. This

So this might sound a bit
confusing at first and of

of compounding in which a bond
might pay interest annually but

interest rate or coupon rate is
the actual price borrowers pay

depth and understand the
different types of interest

obviously translate that into
GDP. So the real interest rate

precise reading of a borrowers
buying power after the position

interest rates and GDP but it's
going to be a lot more in in

So we're going to be looking at
interest rates first and then

rates and GDP of course.

going to be building up upon
everything we've learned about

Yes guys welcome to the next
lesson. So in this lesson we're

the next video.