UGBA 10 Chapter Notes - Chapter 4: Electronic Communication Network, Initial Public Offering, Market Capitalization

• School: Berkeley
• Department: Business Administration, Undergraduate
• Course: UGBA 10
• Professor: Briginshaw John

Document Summary

Obj1: explain the concept of the time value of money and the principle of compound growth and discuss the characteristics of common stock. Time value of money: principle that invested money grows, over time, by earning interest or some other form of return. Best way to take advantage of time value of money is to obtain a high rate of return on you investment (one way to do that is to invest in the stock market) Compound growth: cumulative growth from interest paid to the investor over given time periods. With additional time period, investment grows as interest payments accumulate and earn more interest, thus multiplying the earning capacity of investment. Rule of 72: find the number of years needed to double your money by dividing the annual interest rate (in percent) into 72. 72/ (interest rate in %) = _ years. Or 72/ number of years you want to double your money = __ %