6. N
(1+r)
r = Rate of compounding
N = Number of Periods
7. Compounding Discounting
1
(1+r) N
(1+r) N
Future Value Present Value
Multiply Present Value Multiply Future Value
by factor to get by factor to get
Future Value Present Value
8. Two ways to get Present Value
PV = FV x 1
(1+r) N
or
PV = FV
(1+r) N
9. Rewrite
FV = PV x Factor
FV = PV x Factor
Factor Factor
PV = FV
Factor
10. 1. Calculate factor (1+r) N
2. Is the problem FV or PV?
3. If FV then multiply by PV
FV = PV x Factor
4. If PV then divide FV by
PV = FV ÷ Factor
17. Diversification
Replace one large risk
with lots of small
unrelated risks
Small Small
Small
Risk
Risk
Large Risk
Small
Risk
Small
Risk
Small
Risk
Risk
18. Insurance
Sharing risk
Does not eliminate risk
Reduce your exposure
19. How to Fund an Insurance Pool
Estimate Loss
Estimate Probability
Premium = Loss x Probability
Members = Loss ÷ Premium
20. How to Fund an Insurance Pool
Loss = 100
Probability 1 in 20 or .05
Premium = 100 x .05 = 5
Members = 100 ÷ 5 = 20
32. Saudi Labor Force Around
Total Population 30 million
Non-Saudis 10 million
Saudis 20 million
Adult Population Age 15+ 11 million
Not in Labor Force 6 million
In Labor Force 5 million
Labor Force Participation Rate 45%
Employed 4.4 million
Unemployed 600 thousand
Unemployment Rate 12%
Source: General Statistics Department and Information
33. Employed
paid employees
work in own business
unpaid workers in family business
full-time and part-time
jobs but temporary absence
34. Unemployed
not employed
available
tried to find a job in the last four
weeks
waiting to be recalled from layoff
35. Discouraged
Workers
People who would like
to work but have given
up looking for a job
36. Not in Labor Force
not employed or unemployed
discouraged workers
full-time student
homemaker
retiree
