It becomes more compelling as it increases over time. Basically, when you owe money and die, your children have to pay it back. Then they accumulate their own debt so their children have to pay it then. This goes on for years and years and you end up with a huge national debt that the generations can't pay back and everyone keeps working for money that they don't have.
For compounding interest, there is a formula relating the present worth (P) with the annuity (A). This is shown in the picture. The 'i' is the effective interest rate while n is the time. You should make sure that you are consistent with the units. If your time is in terms of years, your interest should be in terms of percent per year compounded yearly. Moreover, your annuity should be per yearly basis. In this case, it is already consistent so we don't need to convert. Substituting the values,
P = 10,000[(1.08^9-1)/(0.08*1.08^9)]
P = $62,468.88
To add to my last answer: A Pure Market System is a more concise answer.
Answer:
$38.14
Explanation:
The yield to maturity on the bond can be computed using the rate formula in excel as shown below:
=rate(nper,pmt,-pv,fv)
nper is the bond life measured in years which is 10
pmt is the annual coupon payment since the bond zero coupon ,pmt is $0
pv is current price of the bond which is $415.50
fv is the face value of the bond i.e $1000
=rate(10,0,-415.50,1000)=9.18%
implicit interest in dollars for first year=cash proceeds*yield to maturity
cash proceeds which is the same as price of bond is $415.50
implicit interest in dollars=$415.50*9.8%=$38.14
B because if the price goes higher then the supply’s are to decrease
