Tutor profile: Juan J.

What is the time value of money?

Imagine you wanted to buy a Pepsi Can. If you went to a vending machine, it would cost around 2.5 $. Back in the day, this can used to cost less. Around 1 $ some years ago, remember? This is because there is an economic phenomenon called "inflation". Inflation, in general terms, tells you that when time passes, money losses value. Prices of goods and services tend to increase. This is the reason of why the Pepsi Can is now more expensive than some years ago, and it also means that the dollar you had before is not enough to buy the can anymore. Therefore, your dollar lost money among time.

How does a bank business work?

Banks basically lend money to clients at an interest rate. This means that, for example, if you needed 100 dollars, the bank would say "Ok, I can lend you that amount, but I'm going to fix an interest rate of 5% annual). This will mean that, when you pay the bank, you will owe 105 dollars instead of 100 $. On the other hand, there is people who like to have savings and current accounts in the bank. They deposit their money, and this is basically the money that they use to do their entire operation. We can see that a bank is always leveraged, which means that they always owe money to people.

What is a null hypothesis?

Is statistics, we generally like to test hypotheses of different events. For example, we may want to test if the average age of the people in a classroom is greater than 15. Generally, the null hypothesis refers to the hypothesis we want to test if it is true or not. This is the reason why sometimes people say the phrase "the null hypothesis is rejected!". It is basically because we reject or not reject the null hypothesis. With the data that we have, we test if statistically the null hypothesis is true or not. It is very useful to answer different questions of interest.