Notesale: Turn your study into money

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STRUCTURE OF SOCIETY:
Capitalism:
The concept of capialism began with Allan Smith (1723-1790) in his book: the wealth of
nations (1776)
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It is far from being a perfect system but it works for now
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It is a private (as opposed to public) ownership of
the means of production
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Allan Smith thinks economy should be in the hands of people that make it work, not kings
and queens
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The workers, the traders and the
buisnes people are making economy function and are regulating it
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However there are some flaws in this system
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People with a high capital will have a quicker and higher revenue on their capital
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Compound interest:
The compound interest is also called the capital growth
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If at the begining you have £1000, on which you get 10% annual compound interest
( normally it is highly unlikely to have such a high percentage)
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Hence
year 0 - £1000
year 1 - £1100
year 2 - £1210
year 3 - £1331
year 4 - £1464
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51
By looking at those results a formula can be made
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year 25 - 1000(1+0
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70

Future value equation of capitalism:
The future value formula helps us to calculate the value of the sum we originally borrow ( to
buy a house for instance) sometime in the future
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So here it is how it
goes:
Principle: £ P ( money you are borrowing)
Annual interest: i
Number of years: n
Annual repayments: R

year 0 - P
year 1 - P+iP-R

or

P(1+i)-R

year 2 - P+iP-R+i(P+iP-R)-R

or P(1+i)²-R(1+i)-R

year 3 - P(1+i)²-R(1+i)-R+i[P(1+i)²-R(1+i)-R]-R
= [P(1+i)²-R(1+i)-R](1+i)-R
= P(1+i)³-R(1+i)²-R(1+i)-R
Using the formula of the power serie S= a(r^nm-1)/r-1 we get
F = P(1+i)^n-R[(1+i)^n-1]/i

Morgage repayment formula:
Once we have the formula above it is easy to calculate the repayment formula, as after n years
F= 0 ( everything repaid)

In the case of a morgage F= 0
example:
P= £250,000
n= 25 years
i= 5% (0
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05 (1+0
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05)^25-1
= 17,737
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15 per month



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