You and your friend both want to save up to buy a $1000 computer, 3 years from now. You have a track record of earning 10% on your investments, your friend has a track record of earning 5% on her investments.
WHO has to start out with the bigger amount of money, today? WHY?
What is the FUTURE value or FV of putting $1 in a savings account today, and leaving in there for 2 years, if the bank is paying 10%? If its only paying 5%?
What the PRESENT value or PV of receiving $1.21 two years from now, if you have a track record of earning 10% on your money.
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