Your SlideShare is downloading. ×

Eco 202 ch 27 basic tools of finance

705

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
705
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Chapter 27Basic Tools of Finance
  • 2. Survey Question 1 What would you prefer?A. Win 1,000 riyalsB. Flip a coin:50 percent chance you win 2,000 riyals50 percent chance you win nothing.
  • 3. Survey Question 2 What would you prefer?A. Lose 1,000 riyalsB. Flip a coin:50 percent chance you lose 2,000 riyals50 percent chance you lose nothing.
  • 4. Payback?One year?Five years?Ten years?
  • 5. Promissory Note I.O. U. 10 SAR Dr. GaleTrading paper for paper
  • 6. FinanceTime and Risk
  • 7. Key Formula 1 Future Value or FV N (1+r)r = rateN = number of periods
  • 8. r = 7% N FVN=3 1 1.070FV =? 2 1.145 3 1.225 N(1+r)
  • 9. r = 10% N FVN=5 1 1.100FV =? 2 1.210 3 1.331 N(1+r) 4 1.464 5 1.611
  • 10. r = 15% N FVN=3 1 1.150FV =? 2 1.323 3 1.521 N(1+r)
  • 11. r = 15% N FVN=3 1 1.150FV =? 2 1.323 3 1.521 N(1+r)
  • 12. Key Formula 2 Present Value or PV 1 Reciprocal of the N (1+r) FV formular = rateN = number of periods
  • 13. r = 7% N PVN=3 1 .935PV =? 2 .873 3 .816 1 N(1+r)
  • 14. r = 10% N PVN=5 1 .909PV =? 2 .826 3 .751 1 4 .683 N(1+r) 5 .621

×