Effect of Compounding

Effect of Compounding - much money will you have? 4 1 $100...

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Effect of Compounding The effect of compounding is not that great over short periods, but is significant over long time horizons. An extreme example: $10,000 at 10% for 100 years = $137,806,123 1
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The Power of Compounding Even if the interest rate is fixed, money grows at an increasing ( exponential ) rate. The growth rate of change is constant; the amount is not. 2
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The Power of Compounding Back to… $10,000 at 10% for 100 years = $137,806,123 3
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Investing For A Single Period Before we asked this question: If you invest $100 at 10% for one year, how
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Unformatted text preview: much money will you have? 4 1 $100 $? Investing For A Single Period Heres a new question: If you have $110 today from a 10% investment you made one year ago, how much money did you invest? 5 $110 1 ? Present Value Financial managers often want to know how much they need to invest today to have a specific amount in the future. Suppose you need $10,000 in 10 years and can earn 6.5%. What do you need to invest today to have that amount in 10 years? 6...
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This note was uploaded on 01/24/2012 for the course FIN 4260 taught by Professor Victorwakeling during the Spring '12 term at Kennesaw.

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Effect of Compounding - much money will you have? 4 1 $100...

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