Annual percentage yield (APY) | Forex Factory

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Annual percentage yield (APY)

  • #1
  • First Post: Mar 14, 2009 6:10pm Mar 14, 2009 6:10pm
How the Banks that give us 2 or 3 or 4 percent annually survive?

They just invest our money?

How they survive if all they do is giving us money and evem offer us free withdrawals etc.. ?

Thanks
  • #2
  • Mar 14, 2009 6:12pm Mar 14, 2009 6:12pm
Just compare what they pay you to what they charge people that borrow from them for starters
Stubbornly persistent
  • #3
  • Mar 14, 2009 6:19pm Mar 14, 2009 6:19pm
Quite easy, they lend your money out at higher rates. I don't know if the 1:10-model is the same all over as here in Norway but if your put 100k € into your saving-account, the bank can lend out 1 million € (1:10) based on your deposit.
Measure twice, cut once
  • #4
  • Mar 14, 2009 6:28pm Mar 14, 2009 6:28pm
Quoting aediaz1
Quite easy, they lend your money out at higher rates. I don't know if the 1:10-model is the same all over as here in Norway but if your put 100k € into your saving-account, the bank can lend out 1 million € (1:10) based on your deposit.
I guess this is the proportion, indeed (and thanks for confirming).

For every dollar deposited, they get 10 future dollars + interest on 10; if it were 25% active and 15% passive (actual rates in my country), that's 10 dollars back for the bank (12,5 minus 1,5 minus your initial dollar), minus expenses and losses, plus profits on what they get left to speculate with.
  • #5
  • Mar 14, 2009 6:31pm Mar 14, 2009 6:31pm
Quoting aediaz1
Quite easy, they lend your money out at higher rates. I don't know if the 1:10-model is the same all over as here in Norway but if your put 100k € into your saving-account, the bank can lend out 1 million € (1:10) based on your deposit.
I guess this is the proportion, indeed (and thanks for confirming).

For every dollar deposited, they get 10 future dollars + interest on 10; if it were 25% active and 15% passive, that's 10 dollars back for the bank (12,5 minus 1,5 minus your initial dollar), minus expenses and losses, plus profits on what they get left to speculate with on the market place, and on usual commercial exchange transactions and other fees.
  • #6
  • Mar 14, 2009 7:44pm Mar 14, 2009 7:44pm
Look up fractional reserve

http://en.wikipedia.org/wiki/Fractional_reserve

http://video.google.com/videoplay?do...74362583451279
The greatest enemy of a good plan is the dream of a perfect plan.
  • #7
  • Last Post: Mar 16, 2009 5:44am Mar 16, 2009 5:44am
steve10%, doblece, aediaz1, sergiu

Thank you all.
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