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# Eco 202 ch 27 basic tools of finance

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### 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