These are my amazing students! As part of our Business Negotiations class, I asked them to prepare a group dance. They had to work together and we voted on who had the best dance. There were some GREAT ideas here, and I was really proud of them. Make sure you watch the last dance!
As always, this lesson is not intended to be professional advice. This is simply lesson material for ESL students in a Managerial Economics and Corporate Finance class. Posted here for their use or for helping other students.
Financial officers and Managers are extremely responsible for the monetary (货币) goings-on in their companies. As we said before, the Wealth Maximization Rule means that Financial and Corporate Managers are required to maximize (最大化) the profits (收益) for their investors (投资者).
However, maximizing profits requires in-depth (深入)planning and micro-managing (微观) your funds today while considering (考虑) future profits as well.
There are two types of Value (值) that you should be aware of in Finance and Economics.
The first is called Present Value (现值) and is the value today of something that will increase in value in the future. Example: When we loan someone $1,000 at 10% interest, we know that our $1,000 loan will increase in value in the future. Present Value = PV.
The second is called Future Value (未来价值) and is the value that the item will have in the future. Future Value = FV.
I’ll make another post later discussing the many ways to use Present and Future value in your company, but today I just wanted to talk about using them to calculate (计算) “Compound Interest” (复利).
Usually, when we loan money to someone or invest (投资) our money in something, we do so on the condition that we receive back more money than we put in. Our corporation is not a charity (慈善机构), we don’t loan you things for free! The original money we invest is called the Principal (本息). The extra money we get on top is called the Interest (利).
Example ~ Company A (a large global corporation) invests $100,000 in a small new business called Company B. Company B has 10 years to pay it back. But Company A doesn’t do this for free ~ they want to maximize their profits too. That means they have to make some money on this contract (合同). So they ask Company B to pay an additional 7% per year.
$100,000 = Principal
7% = Interest
Problem! ~ 7% of what?
Answer! ~ It depends
It depends on how Company A decides to count it.
There are two separate mathematical formulas (数学公式) you can use to figure out the Interest.
The first one is called Simple Interest (单利) and I’ve already looked at it before.
The second method is called Compound Interest (复利). Compound Interest says that each payment period, Company B is going to pay an additional 7% of the currently owed principal! Lenders and Investors really like compound interest a lot better than simple interest.
For example: I borrow $1000 due in two years. My interest rate is 10%.
If I use Simple Interest: Year 1, I owe $1000 + 10% interest = $1100. Year 2, I owe $1100 + (10% of $1000) = $1200. 🙂
If I use Compound Interest: Year 1, I owe $1000 + 10% interest = $1100. Year 2, I owe $1100 + (10% of $1100) = $1210
The formula for Compound Interest is:
I = Interest
P = Present Value
R = Interest Rate
T = Number of Years Involved
N = Number of Times a Year
Company A (a large global corporation) invests $100,000 in a small new business called Company B. Company B has 10 years to pay it back. The interest rate is 7% compounded bi-annually. What is the Total Interest (利) you will pay over 10 Years?
The total interest is of course important to both Company A and Company B, there are two other important numbers that the financial managers of Company A want to know–the Present Value of their money and the Future Value of their money.
FV = Future Value (how much money you will make in total)
PV = Present Value
R = Interest Rate
T = Number of years involved
N = Times per Year
Using our example above with Company A & B, the Future Value is calculated like this:
That means Company A will make a total of $286,968.46 if they invest their $100,000 in Company B now. Over 10 years, their $100,000 will change into $386,968.46. We like this plan!
Sometimes, for example with bonds (债券), we know the Future Value (how much money will be paid to us in the end). But we don’t know how much money has to be invested (Present Value) to get that future result. So Present Value is calculated by the formula:
PV = Present Value
FV = Future Value
R = Interest Rate
T = Number of years involved
N = Number of Times per Year
Example: Mary Jane knows that in 4 years, she needs to have a total of $150,000 to pay her college tuition. She has an interest-generating account that gives her a 4% compound interest rate bi-annually on everything she puts in. How much money should she invest today (Present Value) in order to have $150,000 in 4 years?
That means that Mary Jane needs to put $101,336.67 in her bank account now in order to get $150,000 in the future.
Had our first major Mid-Term exam yesterday (your today). Then we took our online computer exams – Three classes of students in 6 hours (+ another 2 hour class I taught). Busy Day!
LMAO!
I was asking my students on our WeChat group (like a Group Chat) if they had class Monday night so we can schedule our exams.
D quickly replied “No, I have a party class.” 0_0
Party class? Say what!?! And I wasn’t invited? How rude!
The group erupted with 63+ Chinese-language messages in a matter of minutes as the class leader started with “What the HE** is a party class.” Another “ooh, class on how to dance.” “Let’s Party!” “Can I come?” “Do you get to drink?” Lots and lots of laughing pictures and emoticons.
At the same time a whole line of students with”I don’t think the teacher will understand.” “Oh, that’s a bad translation.” “The teacher is going to think you want to go party.” “This is very bad.” “You shouldn’t say that. You cannot trust translation my dear.” “Don’t you know to stop and check every three words? D replies again–“Oh, no! Now I think the teacher will misunderstand me!” (Horror Face).
At which point, the whole group started posting a series of Chinese phrases that have really bad English translations. Like “My father-in-law isn’t coming” which translates as “The father-in-law will not be coming to my bed.” It was bad 😛
My response: “Is that a class party? Party during class? Class about how to party?” This sounds fun and now I’m sad I wasn’t invited to the party lesson! 😦 😦 😦 ” LOL
Finally, one of them came back with a screen capture of the definition and translation in the Chinese-English dictionary of “Communist Party”–“It’s this one teacher, not a “party class” it’s THE Party class.” Ah! Makes Much More Sense. . . . And a much better reason for not being able to make the Exam on time! 😛
Hello-our internet sucks, so I’m posting this for some of my students 🙂 You’re welcome to enjoy it too!
😛 I am teaching a class of students whose English is particularly bad, but I had them last semester too and we have been moving along. It takes translating every couple of words (money, war, economy, market, cash, coin, card) to communicate, but we were happy with our steady if slow pace 🙂
Then Today, I had two new students join the class from Int’l Trade 1 (the best students, include one who has excellent English). At the beginning, I asked the students to translate one of the words as usual. Normally it takes us a bit to look it up and figure out a Chinglish version. Now, immediately the new boy spits out verbatim the precise 3 sentence long definition from the textbook by memory. 0_0 It was the funniest thing. The entire class stopped, turned and stared at him. One girl threw up her hands, another started groaning. The entire group almost in unison went “ooooohhhhhh” and one actually WHIMPERED. LOL. He jerked back and looked around. After that he figured out pretty quick the others weren’t at that level. 🙂 Seriously, we’re working at “this is called demand” level and he’s off on QD = a + bP + cT + . . . . level. Boom. . . mic dropped, bar raised.
“She was free in her wildness. She was a wanderess, a drop of free water. She belonged to no man and to no city” ~ Roman Payne
Language Translation
Deceptively Blonde 