For the future value part, $100 = 100%. A return of 20% on that equals $20. Then the total is $120, which is 120% of what you started with. 100% is the same as 1.
20% rate of return is purely for illustration. Multiplying by 1 is the same as multiplying by 100%, and multiplying by 0.2 is the same as multiplying by 20%. Add up 1 and 0.2 and you get the 1.2 multiplication factor. Hope that helps!
Wow quickest easiest explanation to the concept . Great job
Thank you so much! 😊
Your channel has been so helpful to me, thank you!!
So happy to hear that! Please share it with friends and colleagues. 😊
Fv= P(1+i)
Thanks
Happy to help! Thank you for watching.
Thankkk youuu
You're welcome 😊 Here's how to apply these concepts in a Net Present Value calculation: ua-cam.com/video/N-lN5xORIwc/v-deo.html&pp=gAQBiAQB
How did you get 1.2 ?
Just for illustration purposes. I assume 20% return. 1 + 20% = 1 + 0.2 = 1.2.
@@TheFinanceStoryteller oh wow! Thank you! So, for me to fully understand this; why do you have to add 1 ?
For the future value part, $100 = 100%. A return of 20% on that equals $20. Then the total is $120, which is 120% of what you started with. 100% is the same as 1.
How will get you 1.2 😮how how
20% rate of return is purely for illustration. Multiplying by 1 is the same as multiplying by 100%, and multiplying by 0.2 is the same as multiplying by 20%. Add up 1 and 0.2 and you get the 1.2 multiplication factor. Hope that helps!