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A snapshot of the summary  2 Financial markets

4 The meaning of Interest Rates

4.1 The Timeline

What are the two types of cashflows?Inflows (positive) and outflows (negative )

Give the timeline of this situation: ou have to pay 10.000$ tuition fee over 2 years; the payments must be made at the start of each semesterTimeline:

4.2 The Three Rules of Time Travel

What are the three rules of time travel?Rule 1: Only value at the same pint in time can be compared or combined.
Rule 2: To move cash flows forward in time you must compound it. (Future value)
Rule 3: to move a cash flow backward in time, you must discount it. (Present value) 
Suppose you invest $1000 in an account paying 10% interest rate per year. How much will you have on your account in 7 years? 20 years? 75 years?7 years: $ 1 948.72
20 years: $ 6 727.50
75 years: $ 1 271 895.37 
You have the choice between $ 5 000 today (interest rate 10%) and $ 10 000 in five years, what do you choose?The $ 5 000, they will be worth $ 12 968.71 in 10 years

If a bond will be worth $15 000 in 10 years with an interest rate of 6%, how much is it worth today?$ 8 375.92

Suppose we plan to save $1000 today, and
$1000 at the end of each of the next two years.
If we can earn a fixed 10% interest rate on our
savings, how much will we have three years
from today?$ 3 641 
How much is $ 10 000 in 5 years with
10ù interestrate worth today? And $ 5000 now worth in 5 years? And together that is?$ 6 209
$ 8 053 
4.3 Valuing a Stream of Cash Flows

You lend money and think you will be able to pay $5000 the first year and $ 8 000 the next 3 years. If the financier would otherwise earn 6% per year on his savings, how much can you borrow from him now?$ 24 890.65

4.4 Calculating the Net Present Value

Where is calculating the NPV useful for?To evaluate an investment decision. It compares the present value of cash inflows (benefits) to the present value of cash outflows (costs).
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