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asset

Page history last edited by PBworks 15 years, 9 months ago

Asset

 

Tool for transferring purchasing power into the future.

 

People hold all sorts of assets- physical goods, cash, stocks, bonds, real estate, etc -

 

We might transfer purchasing power today into assets for a number of reasons - maybe to save for retirement, or for particular goals, or maybe or earnings today exceeds our spending today.

 

 

Measuring returns

 

Because we have assets in order to consume in the future, we measure the value of an asset based on its rate of return over time. Does the asset become more valuable? or less? How does that value change compared to other assets (you could have owned)?

 

  • Calculation: (future value - today's value) / todays value = % rate of return

 

Predicting future returns

 

Since you can not know the future, you base your asset-decisions today based on your expected rate of return in the future.

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