7-Investment, salary and Exponential curves
With https://www.desmos.com/calculator , you can plot graphs for the given exponential curves y=exp (0.0953x) y=exp(0.1823x) y=exp(0.2624x) Observe the differences of heights at x=5,10,15,20 etc on these curves.What do they say about your investments? These curves are continuous time approximation for compound returns of 10%, 20%,30% respectively. The exponents are obtained by the force of interest = ln(1+r) formula. The height difference tell how much one investment is better than the other at each point. For ex. at 5 years, at 10% , your money would have grown 1.61 times the initial amount,2.48 times if its compounded at 20% annually, 3.71 times if its compounded at 30 percent. At 20 years, multiples stand at 6.73 times, 38.32times , 190 times initial investment for 10%,20%,30% compounded respectively. Growing investments 30% or even 20% is not easy for 2 decades. What about the salary? How different is from investment. Unlike investment, you receive salary