FIN 300 Lecture Notes - Lecture 4: Economica, Preferred Stock, Common Stock

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in 10 years, in 20 years, in 30 years (given 4% of annual interest rate: basic financial principal. A dollar received today is worth more than a dollar received tomorrow. Future value: future value id the amount to which an investment will grow after earning interest. Interest is earned only on the original interest. You invest in an account paying simple interest at the rate of 6% per year. Interest earned per year = x 6% = . 00. You earn interest only on the original investment. Total interest earned over 5-year period = x 5 = . 00. Balance in account at end of year 5 = 5 + = . 00. Fv = pv x (1 + t x r) You invest in an account paying compound interest at the rate of 6% per year. How much will the account be worth in 5 years.

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