BADM*4070 DE Chapter Notes - Chapter 2: Annual Percentage Rate, Opportunity Cost, Investment
Document Summary
The single most important technique in nancial planning is how to compare the amounts of money you"re going to receive at di erent times. Discount bonds don"t pay any interest, the interest you receive on it, is the nal payment of the face value of the bond, at maturity. The discount rate is a rate of return. Its how much money we"ll either get on an investment, or the amount in interest that we"ll need to get a speci c return on an investment. Its also the amount in terms of return you expect to get on an investment. The opportunity cost, is the cost you"re going to incur by indulging in something today, over doing something else. We come up with the discount rate, by picking the best available discount rate on the market that would o er us a guaranteed return (for example 10% on a gic).
