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Thursday, January 20, 2005
Brownie points to the first to figure out the problem with this analysis in my Analytical Methods supplement:
$1.06 is known as the future value of $1 invested for one year at 6 percent. By the same logic we can say that $.94 invested today at 6 percent will yield $1 in one year. The $.94 is the present value of $1 to be received in one year when the interest rate is 6 percent.
Emphasis in original.
I'm also annoyed by the lack of "%" use and the decimal without a 0.
For the record, that was taken from Robert C. Higgins, Financial Management: Theory and Applications (1997) p. 41.
Posted by Gel 9:59 AM Post a Comment
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