OK hold on - let me explain
one example is 8.3 million tied up for 10 years. your 5% example.
you get 5% on 8.3 each year or $415,000
The example i gave is 8.3 million up front like your example, but
you receive 1.34 million each year that you can then re-invest in
something else.
SO, it is a better stream of cash flows
Trust me on this one, i do this for a living
--- In AsburyPark@yahoogroups.com, "justifiedright"
<[EMAIL PROTECTED]> wrote:
>
> That's right - which is why I don't think the posts have been
> correct in calling the deal as presented a 10% rate of return to
the
> investor.
>
>
>
>
> --- In AsburyPark@yahoogroups.com, "dfsavgny" <dfsavgny@> wrote:
> >
> > --- In AsburyPark@yahoogroups.com, "justifiedright"
> > <justifiedright@> wrote:
> > >
> > > So if I put 8.3 million in a safe investment vehicle with 5%
> > > compounded annually, how much would I have at the end of 10
> years?
> > >
> >
> > $ amount X (1 + i)^n
> >
> > i = rate of interest
> > n = compounding periods
> >
> > Let's you find the compound interest factor
> >
> > The answer using your numbers
> >
> > $8.3M X (1 +5%)^10
> > $8.3M X 1.628895
> >
> > $13.519825M
> >
> > Go in reverse. What is the present value of $13.519825 to be
> received
> > in 10 years assuming a 5% interest rate.
> >
> > Present value factor is reciprocal 1/(1+i)^n
> >
> > $13.519825M X 1/(1+5%)^10
> > $13.519825M X .613913 = $8.3M
> >
>
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