Alternative Order

  

Think of an alternative order as an either-or instruction to a broker. So you'll give your broker two options and if one of the options is executed, then the other order is immediately cancelled. As in “do one or the other of these, but for goodness sake DON’T DO BOTH!!!!”

It's like if your friend says he'd like to go to either Arby's or Taco Bell. Either one might be fun, but going to both probably points to a long night spent sitting on the modern day phone booth. In practical terms, an alternative order might go something like this: "either buy shares for New Tech Co. if it reaches $10 per share, or buy shares of Old-Tyme Car Maker Inc. if it hits $15 per share." The broker will then buy whichever stock hits its target first, then ignore the other option.

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Finance: What is principal?707 Views

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finance a la shmoop what is principle answer its the loan amount you borrow

00:08

when you do you sign a bunch of papers promising to pay back the principal and [Person signs paper]

00:12

the interest that goes with it and that interest is like rent you have to rent

00:17

that money you swear up and down you'll pay back the principal that princess is

00:21

not necessarily your pal it might be a monkey on your back it might be a mule [Mule kicking a man]

00:26

that kicks you the wrong way but you owe it you owe that principal to the lender

00:32

who loaned it to you and you want to put it on a diet as fast as you can

00:37

why well because when that principal shrinks the rent you owe on it shrinks

00:41

as well all right here's some simple math you borrow 40 grand by a

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three-year-old ludicrous mode enabled Tesla with a few minor dents and you [Man driving a supercar]

00:51

know you got a few shards of deer antlers stuck in the grille there for

00:54

free you are considered a risky bet by the lenders loaning you your money or

00:58

principle partly because of the way you drive so the rent on that principle 12%

01:03

a year or 1% a month big interest rates because well you're such a crappy driver

01:08

so on 40 grand of principal the cost to rent that money is 400 bucks a month or

01:12

$4,800 a year that is just to stay even on the principle you've borrowed you [Principal interest payment chart appears]

01:18

have to pay $400 every month and that's just the interest if you paid 30 40 50

01:23

60 months of 400 bucks a month well you would still owe that principal of 40

01:29

grand because all you did was baby interest or rent on it

01:31

ouch but what if he went six months paying a full thousand dollars a month

01:35

yes much would go from not eating or something like that well what would [Guy driving blue tesla]

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happen think about that first month you've quote overpaid unquote by 600

01:44

bucks so if your loan resets or recalibrates every month well then you

01:48

get to put your principal at least a little bit on a diet so after that first [Principal constricted by tape measure]

01:53

month of paying a grand your 40 grand in debt goes down to thirty nine thousand

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four hundred dollars pay a thousand bucks another month and while you're

02:01

still paying twelve percent a year or one percent a month to rent that money

02:05

only now that monthly rent was reset at one percent of thirty nine thousand four

02:11

hundred or 394 bucks right six dollars cheaper

02:14

than the 400 you started with but you paid a grand so now you get to use 606

02:20

dollars to pay down the principal and see the math there the new principal

02:23

thirty nine thousand four hundred minus at six hundred six it's now thirty eight

02:27

thousand seven hundred ninety four dollars that you owe do a grand another

02:30

month and you get to pay down even more of the principal about three hundred

02:34

eighty eight bucks is attributable to interest but you paid a grand so that's

02:38

a thousand minus the three eighty eight there so then that goes to principal pay

02:42

down or $612 a principal pay down alright you're getting the gist here as

02:46

you paid down the principal you get to attribute more and more of that made-up [Clock ticks as money stacks land]

02:51

thousand dollars a month payment so check out what happens when you just

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keep going and as we look a couple of years into the future just look at how

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little interest there is now here relative to what there was when we

03:03

started so yeah it's totally worthwhile to pay

03:05

more than minimum payments when you can and you know really as much as you can

03:09

manage that way when your bank statement for what you owe arrives in the mail you [Bank statement appears through letter box]

03:14

you know don't feel like a dear

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