Compound Interest

Unit 1.1 DB: Compound Interest

Define the term “compound interest.” How does compound interest differ from “simple interest”

Unit 1.2 DB: Internet Search

Search the internet for any short article related to finance and then post a couple of sentences here about what you’ve learned or what your thoughts are

Unit 1.3 DB: Percent Increase and Decrease

When corporations release earnings, they often include the prior year’s numbers a well as the current year’s. Often, the numbers are translated into percentage terms. Therefore, it’s helpful for you to know how to calculate percent changes quickly by estimating and rounding.

What is the percent increase for revenues which have grown from $150 (million) last year to $200 (million) this year. Show all steps.

Unit 2.1 DB: How to use the "Rule of 72" to estimate Compound Interest

The Rule of 72 states that IF rate*time=72, your investment will double.

Referring to the example if $1000 grows to $2000 in ten years, you see that this is a double. Thus, rate * time=72. Plug in the 10 years for time, and the formula becomes…rate * 10 years=72. Thus, rate=7.2%!

QUESTIONS:

Using the Rule of 72, estimate how long it will take to double your investment if you earn 6%?

If you earn 8%?

If you earn 12%?

Unit 2.2 DB: Hint for Assignment 2

Where do you put the number for “other expenses”

Unit 3.1 DB: TVM Formulas for Single Sum Calculations

To compute future value (fv) of a single sum, use Table A1 in the appendix and the formula: fv = pv * factor.

To find the present value (pv) of a known future amount, use Table A2 in the appendix and the formula pv = fv * factor.

Question 1: You invest $3000 for 8 years and expect to earn 9%, on average, per year. What is the fv ? Solve, using Table A1.

Question 2: You want to have $6000 eight years from today to purchase a G. Loomis fishing rod and a Van Staal fishing reel. You expect to earn 9%, on average. How much should you invest today to reach your target in 8 years ? Solve, using Table A2.

Be sure to show the formula and your “plug-in’s, then solve. Show all the steps in your work.

Unit 3.2 DB: TVM Formulas for Annuities

First, define the term annuity. Then, check the annuity tables A3 and A4.

Do these annuity factors exhibit the same inverse relationship as single sum factors?

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Unit 3.3 DB: Rule of 72 Questions

Here is a question for you to solve using the Rule of 72. Question: In 1967, tuition, room & board at a private college costs $3000. In 2007, the same services cost $48,000. Find the avereage annual rate of college-cost inflation, using the Rule of 72. Hint: first, estimate the number of doubles. Since each double represents 72 compounding percents, you can then find the total number of compounding percents. Finally, plug-into the formula rate * time = total compounding percents, and solve for rate.

Unit 3.4 DB: Practice Problems for Chapter 5

Use this thread to post your solutions for Q1, Q2, and Q3 on Page 144.

Be sure to show all the steps in your work.

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Unit 4.1 DB: Hints for Case Problem 4

For CP4, what items can you depreciate? Are additions to working capital depreciable?

Unit 5.1 DB: Key Cost Capital Term: Credit Facility

In this article, what is the meaning of the term “credit facility”?

Unit 5.2 DB: Error on Slide 10

FIN201, there is an error in Slide 10. Once you’ve reviewed the lecture, go back to Slide 10 and see if you can spot the error. Post your comments here.

Unit 6 DB: Practice Questions for the Final Exam

Here are some practice questions designed to prepare you for the final exam. Work together to solve these questions.

Solve the following using The Rule of 72

Unit 6 DB: Practice Questions for the Final Exam

Here are some practice questions designed to prepare you for the final exam. Work together to solve these questions.

Solve the following using The Rule of 72.

You expect to earn 8% per year on your investment. If you invest $3000 today, how much will your investment be worth in 9 years ?

You want to have $40,000 available to finance a trip around the world in 12 years. You estimate that you can earn 12% on your investment. How much do you need to deposit today to meet your goal ?

A new Grady White fishing boat cost $5000 in 1979. Today, the very same boat costs around $40,000. Estimate the average annual inflation rate, using the Rule of 72.

You invest $2000 today and expect ot earn 9% per year. how many years will it take for your investment to grow to $32,000 ?

Unit 7 DB: Class Discussion

Unit 7 Class Discussion