CALCULATING RETURN ON INVESTMENT (ROI) 1. What is your total percentage return on investment if you buy a stock for $50, sell it for $55 and received a.

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CALCULATING RETURN ON INVESTMENT (ROI) 1. What is your total percentage return on investment if you buy a stock for $50, sell it for $55 and received a $5 dividend during time of ownership? 2. If your bill at a restaurant comes to $80 and you want to tip 30%, how much should you tip?

Future Value - how much an investment will be worth at some time in the future. Compound Interest – Yay! Shows that interest in not just earned on the initial investment but in each future year interest is being paid on the previous interest!

Quick example of the concept of compound interest:  1. $100 is invested with a 10% annual return  2. After Year 1, the total investment is worth $110  3. The interest earned in Year 1 was $10  4. After Year 2, the total investment is worth $121  5. The interest in Year 2 was $11 because of compound interest (we were getting paid interest on the interest from Year 1).

FV = P*(1 + r) n Where FV = Future Value, P = Price (the initial investment), r = interest rate, and n = # of years. EXAMPLE: Bob invests $1000 today (P) at an interest rate of 5% (r). After 10 years (n), his investment will be worth:  F = 1000*(1+.05) 10 = 1,  Make sure to convert the interest rate from a percentage (like 8%) to a decimal (like.08).