THE THEORY OF INTEREST

choose a 40 per cent investment opportunity when hisdegree of impatience is only 20 per cent. Thus, he maybe pictured ascending a staircase on the Opportunity line.The successive steps, in this case, grow less steep as he pro-ceeds. At each point he decides whether to take the nextstep or not by comparing its steepness with that of the W

CHART 36

W Lines Showing Different Degrees of Impatience and O Lines ShowingDifferent Rates of Return.

line at that point. The successive W lines will be moreand more steep as he goes on investing successive $100’s,while the Opportunity line will become less and less steep.

When the point is reached where the Opportunity lineis no longer steeper than the Willingness line, he willstop investing. The Willingness line through that pointwill have the same steepness as the Opportunity line,say 30 per cent. That is, the two curves will there betangent. This point of tangency, R, is shown in Chart 37.

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