Thanks for the video. Can you explain the formula of subtracting 1 from (1+r)^t?
@professorikram4 жыл бұрын
Yes of course. Subtracting 1 is our way to figure out the compounded rate of return earned. Let me give you a simple example. Suppose you have $1 and you invest it for 1 year at interest rate r. After one year you would have $(1+r). If somebody asks you “what rate of return did you earn did you earn over the year”, you’d say r, which is basically $(1+r) - $1. Essentially you can think of subtracting $1 as our way of subtracting the initial “investment” (of $1) to figure out what rate of return we earned over the investment period. The same logic applies over multi-period investing. Good question, hope this helped. Feel free to reach out if you have more questions.
@jillykajulianda32234 жыл бұрын
@@professorikram Very clear explanation! Thank you very much for breaking it down for me :) You're an excellent teacher.
@ditong68994 жыл бұрын
Hi Atif, can you please post a video on a constant growing infrequent perpetuity? For example, if someone was promised $100 paid every 2 years, and the $100 payment also grows by 5% every year (only paid in 2 years interval though), in perpetuity. I.e. The first payment in year 2 is $100, the second payment in year 4 becomes 110.25, the third payment is $121.55, etc .. Many thanks!