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<title>Investment/Loan Graph</title>
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<h1 align="center">Investment/Loan Graph</h1>
<p align="center">Try different values, periods and interest rate to see how your loan or investment will perform.<br>
<a href="#explain">Explanations Below!</a></p>
<script type="text/javascript">investgraphMain();</script>
<p>&nbsp;</p>
<p>(The old flash version is available <a href="investment-graph-flash.html">here</a>.)</p>
<h2><a name="explain"></a>Explanations</h2>
<p>At <span class="large">10% Interest</span> money grows by 10% every year (as explained in <a href="compound-interest.html">Compound Interest</a>):</p>
<p class="center"><img src="images/interest-compound-flow.svg" alt="interest compound $1000, 10%=$100, $1100, 10%=$110, $1210, 10%=$121, etc " /></p>
<p>Which is easier to calculate this way (same result):</p>
<p class="center"><img src="images/interest-compound-flow2.svg" /></p>
<h2>Present Value (PV)</h2>
<p>To see what <b>money in the future</b> is worth <b>now</b>, go backwards (dividing by 1.10 for 10% Interest):</p>
<p class="center"><img src="images/interest-compound-flow-back.gif" width="460" height="31" /></p>
<div class="example">
<h3>Example: Sam promises you <b>$500 next year</b>, what is the Present Value?</h3>
<div class="so"> To take a future payment backwards one year <b>divide by 1.10</b></div>
<p>So <b>$500 next year</b> is $500 &divide; 1.10 = <b>$454.55 now</b> (to nearest cent).</p>
<p>The Present Value is <b>$454.55</b></p>
</div>
<p>See a detailed explanation at <a href="present-value.html">Present Value</a>. </p>
<h2>Net Present Value (NPV)</h2>
<p>The <b>Net</b> Present Value is the total of all Present Values, including subtracting money that went out (the money you invested or spent):</p>
<ul>
<li>Add the Present Values you receive</li>
<li>Subtract the Present Values you pay </li>
</ul>
<div class="example">
<h3>Example: You invest $500 now, and get back $570 next year (interest Rate is 10%)</h3>
<p>Money Out: $500 now</p>
<div class="so">You invested $500 now, so PV = <b>-$500.00</b></div>
<p>Money In: $570 next year</p>
<div class="so">PV = $570 / (1+0.10)<sup>1</sup> = $570 / 1.10 = <b>$518.18</b> (to nearest cent)</div>
<p>And the Net Amount is:</p>
<div class="so">Net Present Value = $518.18 - $500.00 = <b>$18.18</b></div>
<p></p>
<p>So, at 10% interest, that investment is worth <b>$18.18</b></p>
</div>
<p>A Net Present Value (NPV) that is <b>positive is good</b> (and negative is bad). </p>
<p>Read more at <a href="net-present-value.html">Net Present Value</a></p>
<p>&nbsp;</p>
<p></p>
<div class="related"><a href="interest.html">Interest (An Introduction)</a> <a href="compound-interest.html">Compound Interest</a> <a href="compound-interest-calculator.html">Compound Interest Calculator</a>
<a href="investing-introduction.html">Investing (Introduction)</a>
<a href="present-value.html">Present Value</a>
<a href="internal-rate-return.html">Internal Rate of Return</a>
<a href="net-present-value.html">Net Present Value</a>
<a href="index.html">Money Index</a>
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