Rate of

Return

Her name is Gillian.She is choosing her

Husband.

Her name is Sa. She is Gillian’s

best friend.

He is a archeologist.He is dating Gillian. His

name call Matt.

I will not choose handsome boy.

Because they will not loyal to me!

I will choose Matt because he is an

archeologist.Since he likes curio very

much,when I become older,HE WILL LOVE ME

MORE AND MORE.

What??????? It is a wrong

concept!! You are totally wrong!!

Why???????I don`t think

so.

Let me explain to you by an econ concept. I

will explain what is rate of return and use an

example of Curio.

Rate of return of a piece of capital in a certain period is the percentage of the sum of its net receipts and the change in its market value within the period

divided by its initial market value.Net receipts +change in market value

X100%Initial market value

Suppose you are the curio priced on $10000 now. Your value will increase

year by year. He expects your value will increase by a constant amount of

$1500each year. The interest rate is 10%.When will he sell the curio(leave you)??

The annual rate of return from you at different years are listed by the following

table.

Um……

You can see this table.

.

Year Your value of curio Annual rate of returnNow $10000 1 $11500 11500-10000

10000 X100% =15%

2 $13000 13000-11500

11500 x100%=13.04%

3 $ 14500 14500-13000

13000 x100%=11.54%

4 $16000 16000-14500

14500 x100%=10.34%

5 $17500 17500-16000 16000 x100%=9.38% 6 $19000 19000-17500

19000 x100% = 8.57%

Whatever the rate of return from you is larger than the market interest rate, it is more valuable to invest on you than others. To maximize wealth, he

will leave you at the the 4th year which your rate of return will fall below the

market interest rate.

Therefore, Gillian…..if you were that curio, he will love you very much now, but he will leave

you if your market value is smaller than the

interest rate(at the 4th year).Can you see???

Oh no !!!!! I understand

now~……I won't choose Matt now…..I like Edison~~~

Edison….Honey

…..

            

Gillian…….I love you so much!!!!!

IVY CHEUNG(2)FANNY WONG(26)

ANNIE YUEN(30)

THE END