Understanding money management

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Methods of Calculating Interest

The two computational schemes for calculating this earned

interest yield either
simple interest or compound interest.

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Definition and Simple Calculations

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Calculations for determining the economic effects of one or
more cash flows are based on the concept of economic
equivalence.
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Economic equivalence exists between cash flows that have the
same economic effect and could therefore be traded for one
another in the financial marketplace
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Economic equivalence refers to the fact that a cash
flowwhether a single payment or a series of payments-can be
converted to an eyrlivalent cash flow at any point in time.

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