lectur8-page35

lectur8-page35 - If we buy fertilizer six months in...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Why buy fertilizer 6 months in advance? $5,000 of fertilizer X .(06/2) = $150 of interest lost add to that the $5,000 expenditure, and that fertilizer actually cost $5,150 to acquire The example above assumes a 6% annual interest rate. We divide by 2 in the equation above because six months is half of a year.
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: If we buy fertilizer six months in advance, in this example we are giving up the opportunity to earn $150 of interest. So, if we buy fertilizer six months in advance, it actually cost us $5,150 to acquire....
View Full Document

This note was uploaded on 12/29/2011 for the course ECO 210 taught by Professor Malls during the Fall '10 term at SUNY Stony Brook.

Ask a homework question - tutors are online