Ch 27

Chapter 27 is about the basics in finance. It covers insurance, present value, risk aversion, and stocks. The chapter isn't difficult to understand and relies on a lot of common sense knowledge, but the math and understanding behind it might take a bit more time. Overall, the chapter discusses present and future value for money and how to calculate it [X/1+r)^N], how those who are risk aversion would look at the risk rather the reward, how insurance works and lowers the cost people have to pay in case of an accident, but also can make people more reckless. And how one should not put all their eggs in one basis but should diversify in stocks. 

A big point Mankiw makes is that time and risk work closely together. In the value of time, it profits one to measure how much a certain amount on money questions now versus ten years from now to see whether one benefits from accepting the money now of ten years from now, including the interest rate. If the value ten years from now is less the value of the money today, it would benefit the person to take the money now. If vise versa, the person should take the money ten years from now. 

Utility is a person's subjective measure of well-being or satisfaction, so every level of wealth has a certain amount of utility, and as the wealth growths, the marginal utility decreases. This is used to measure the risk aversion may experience in different situations. Insurance plays on this to give people a safety net.