Beruflich Dokumente
Kultur Dokumente
Slide Contents
Principles Applied in this Chapter
5.1
5.2
5.3
5.4
5-2
5-3
5-4
0
-$100
$30
1
$20
2
-$10
$50
5-5
5-6
5-7
5-8
PV or
Interest Earned (5%)
Beginning Value
FV or
Ending
Value
$500.00
$500*.05 = $25
$525
$525.00
$525*.05 = $26.25
$551.25
$551.25
$551.25*.05 =$27.56
$578.81
$578.81
$578.81*.05=$28.94
$607.75
$607.75
$607.75*.05=$30.39
$638.14
5-9
5-10
5-11
5-12
Applying Compounding to
Things Other Than Money
Example A DVD rental firm is currently renting
8,000 DVDs per year. How many DVDs will the
firm be renting in 10 years if the demand for
DVD rentals is expected to increase by 7% per
year?
Using Equation 5-1a,
FV = 8000(1.07)10 = 15,737.21 DVDs
5-13
5-14
5-15
5-16
5-17
5-18
5-19
5-20
The Rule of 72
It determine the number of years it will take
to double the value of your investment.
N = 72/interest rate
For example, if you are able to generate an annual
return of 9%, it will take 8 years (=72/9) to double
the value of investment.
5-21
5-22
5-23
5-24
5-25