From the future value table, you will notice that $1 invested at 12% interest for 5 years (assuming annual compounding) becomes $1.7623. How much would you have in your bank account if you had deposited $100 and waited 25 years, assuming the account pays 8% interest compounded annually? Answer: $684.85 (the power of compounding!)

From the present value table, you will notice that $1 in 15 years has a value today of only $0.2394, assuming the interest rate is 10%. That is, $0.2394 (24 cents) invested for 15 years at an annual compound interest of 10% will grow to $1.00 after 15 years.

Example:

It is 1889 and you have come into a nice inheritance from your great aunt. You consider traveling to Paris and looking into the new "impressionistic" art scene - which you have heard is quite interesting.

Your trip would cost $400 and you would have $100 to buy a painting. Somebody mentions there is a colorful painting of irises by an obscure, apparently mentally unstable artist who lives in Arles. Or you could stay home and invest your $500 in the booming market in railroad stocks. (More>>)