This dollar would be 1.11 to the third.

This is the difference between the two.

Then to discount money in the future to the present, we divide it by 1 plus the discount rate so this is a 5 discount rate.

Anyway.

Anyway, this is, I think, just the big picture investment adds value to society.

But if you were to present value this let's say they make 1 forever going into the future and you were to present value this using a discount rate.

But the present value, what does that mean?

Add that together with the gas, and it's 112,000 per year, just for that sign in each direction.

We'll now learn about what is arguably the most useful concept in finance and that is called the present value.

So once again we have verified, by taking the present value of 110 in 2 years to today, that its present value if we assume a 5 discount rate.

Notice I'm just adding up the present values of each of those payments.

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Well that's just 50 divided by 1.05, plus the present value of our 35 payment.

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That is 100.

But that's just 1.02 divided by 1, which is just 100. 100 today.

So how do you compare the two?

And then to get its present value, its value today, you divide that by 1.05 again.

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let me just scroll down so let's say that one year so today, one year so we figured out that 110 a year from now, its present value is equal to so the present value of 110 is equal to 104,76.

42 million in adjusted dollars. That's minus payload, of course.

What's the present value of 50 in 1 year?

Hopefully people will be watching this in the next millenia.

And the notation is PV

But the big learning from this is how dependent the present value of future payments are on your discount rate assumption.

Hopefully we added value.

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Actually I meant to present value it.

Just like we did here.

So that is the value in 2 years.

To compound the amount of money we invest we multiply the amount we invest times 1 plus the yield.

Well, we said let me do that in a different color.

Present value of 100 today is 100.

When you lower the interest rate, the present value of this future payment goes up.

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Well the present value of that is going to be so plus 50 divided by 1.05, right that's the present value of the 50, because it's 1 year out.

And the way to add an element is just to use an assignment.

When any two girls are matched up, there's an expectation of which will win based on their current rating, right?