# Summary: 2 Financial Markets

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## Read the summary and the most important questions on 2 Financial markets

• ### 4.1 The Timeline

• #### What are the two types of cashflows?

Inflows (positive) and outflows (negative -)

Timeline:
• ### 4.2 The Three Rules of Time Travel

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• #### What are the three rules of time travel?

Rule 1: Only value at the same pint in time can be compared or combined.
Rule 2: To move cash flows forward in time you must compound it. (Future value)
Rule 3: to move a cash flow backward in time, you must discount it. (Present value)
• #### Suppose you invest \$1000 in an account paying 10% interest rate per year. How much will you have on your account in 7 years? 20 years? 75 years?

7 years: \$ 1 948.72
20 years: \$ 6 727.50
75 years: \$ 1 271 895.37
• #### You have the choice between \$ 5 000 today (interest rate 10%) and \$ 10 000 in five years, what do you choose?

The \$ 5 000, they will be worth \$ 12 968.71 in 10 years

\$ 8 375.92

\$ 3 641

\$ 6 209
\$ 8 053
• ### 4.3 Valuing a Stream of Cash Flows

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\$ 24 890.65
• ### 4.4 Calculating the Net Present Value

This is a preview. There are 2 more flashcards available for chapter 4.4