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Today I Give You $ 100 You Pay Me $ 100

The document discusses lending and borrowing money over different time periods with interest rates applied. It provides examples of lending $100 today and receiving repayment in the future with rates of 5% applied annually or for longer periods like 20 years.

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sachin rawat
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18 views5 pages

Today I Give You $ 100 You Pay Me $ 100

The document discusses lending and borrowing money over different time periods with interest rates applied. It provides examples of lending $100 today and receiving repayment in the future with rates of 5% applied annually or for longer periods like 20 years.

Uploaded by

sachin rawat
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Today

I give you $ 100


You pay me $ 100
Today Next Year
I give you $ 100
You pay me $ 95
r 5%
Compensation for waiting to get money back
Compensation for inflation
Compensation for risk that I won't pay you back
Today 20 Years from now
I give you ### $ 100
You pay me $ 38
r 5%
Today 1 2 3 4 5 6 7 8… 50 …
I give you $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100 $ 100
Value today @ r=5% $ 95 $ 91 $ 86 $ 82 $ 78 $ 75 $ 71 $ 68 $ 9
You pay me $ 2,000
100 …
$ 100
$ 1

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