There are a few formulas that have tremendous influence in your life.
V=IR.
That is the formula known as Ohm’s Law. One of the basic formulas of electricity. It is powerful. It doesn’t matter whether you know it. It does not matter if you believe it in or not. It serves if you follow the rules it governs and can damage you to the point of no return if you choose to ignore it.
ΔSuniv> 0. Have you seen this formula before. It expresses the Second Law of Thermodynamics. Many books have been written on this law. It affects our life in so many different ways. In fact you can just be sitting doing nothing, this law is still working on you, destroying you.
Fv = Pv(1+r)n . This is the simplified form of the compound interest formula. A formula that expresses the relationship between time and money.
Future Value is equal to Present Value added to the interest rate the present value earns every period up until the nth period.
RM 100 invested at an interest rate of 10% per annum (one period) has a value of RM110 after compounded for a year. After 2 years, it is RM 121. Take note, it is not RM 120, but RM 121. The extra RM 11 is the interest paid to RM 110. That is what compounding interest means.
You can use this formula to find how much something will cost in the future if you know the growth/inflation rate.
If you drink a cup of coffee worth RM 10 today and with a inflation rate of around 3% (Malaysia’s average inflation rate the last 20 years – what is officially published), the same cup of coffee will cost RM 10.30 next year and more than RM 11 in four years’ time. This is not exact but, you get the idea.
The importance of this formula cannot be overstated. The common man fails to understand this formula. Even if you cannot really comprehend it, you must know the rule it governs. The rule of money against time.
