This homework activity checks your understanding of the core principles in money and banking, the role of money, the valuation of financial instruments, and the effect of inflation on interest rates. Briefly answer (in a list or short paragraph) the following questions:

• Identify the core principles that could be used to explain why credit card issuers charge such high rates of interest. Refer to Chapter 1, section "The Five Core Principles of Money and Banking," pages 4-8.
• Explain why the following statement is true: "Money is an asset, but not all assets are money." Refer to Chapter 2, section "Money and How We Use It," pages 23-25.
• Identify the four fundamental characteristics that determine the value of a financial instrument. Refer to Chapter 3, section "Primer for Valuing Financial Instruments," pages 50-51.
• If a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, explain how a higher-than-expected rate of inflation will impact the parties, if at all. Refer to Chapter 6, section "Inflation Risk," pages 151-152.

View RubricWeek 3 Homework Activity – Banking Concepts 1Week 3 Homework Activity – Banking Concepts 1CriteriaRatingsPtsIdentify the core principles that could be used to explain why credit card issuers charge such high rates of interest.20 to >18 ptsExemplaryThoroughly identified the core principles that could be used to explain why credit card issuers charge such high rates of interest.18 to >16 ptsCompetentCompetently identified the core principles that could be used to explain why credit card issuers charge such high rates of interest.16 to >14 ptsSatisfactorySatisfactorily identified the core principles that could be used to explain why credit card issuers charge such high rates of interest.14 to >12 ptsNeeds ImprovementInsufficiently identified the core principles that could be used to explain why credit card issuers charge such high rates of interest.12 to >0 ptsUnacceptableDid not submit or did not identify the core principles that could be used to explain why credit card issuers charge such high rates of interest./ 20 ptsExplain why the statement is true: "Money is an asset, but not all assets are money."20 to >18 ptsExemplaryThoroughly explained why the statement is true: "Money is an asset, but not all assets are money."18 to >16 ptsCompetentCompetently explained why the statement is true: "Money is an asset, but not all assets are money."16 to >14 ptsSatisfactorySatisfactorily explained why the statement is true: "Money is an asset, but not all assets are money."14 to >12 ptsNeeds ImprovementInsufficiently explained why the statement is true: "Money is an asset, but not all assets are money."12 to >0 ptsUnacceptableDid not submit or did not explain why the statement is true: "Money is an asset, but not all assets are money."/ 20 ptsIdentify the four fundamental characteristics that determine the value of a financial instrument. 20 to >18 ptsExemplaryThoroughly identified the four fundamental characteristics that determine the value of a financial instrument.18 to >16 ptsCompetentCompetently identified the four fundamental characteristics that determine the value of a financial instrument.16 to >14 ptsSatisfactorySatisfactorily identified the four fundamental characteristics that determine the value of a financial instrument.14 to >12 ptsNeeds ImprovementInsufficiently identified the four fundamental characteristics that determine the value of a financial instrument.12 to >0 ptsUnacceptableDid not submit or did not identify the four fundamental characteristics that determine the value of a financial instrument./ 20 ptsExplain how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.20 to >18 ptsExemplaryThoroughly explained how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.18 to >16 ptsCompetentCompetently explained how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.16 to >14 ptsSatisfactorySatisfactorily explained how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.14 to >12 ptsNeeds ImprovementInsufficiently explained how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.12 to >0 ptsUnacceptableDid not submit or did not explain how if a borrower and a lender agree on a long-term loan at a nominal interest rate that is fixed over the duration of the loan, a higher-than-expected rate of inflation will impact the parties, if at all.