Mind you, I have been reading Mises for quite a while now - almost a year, if not more. I am well versed that interest rates cannot be tampered for malinvestments will occur, etc.
It is only recently I found the reading list on this forum (see the sticky =D). I thought, “Hey, I need this more than anything,” after all, you can’t base your knowledge on economics solely on daily articles. 
So, I have been reading Economics for Real People as my start. That being said, I was doing fantastic in understanding - daily articles do benefit understanding, after all!
However, I got befuddled on page 111 - 114. This is in Chapter 7, when he began talking about economic roles and historical types. Under the section, “Capitalists/Landowners”, I began to become confused. Let me quote exactly what he wrote and what part he I began to fell apart trying to place the pieces of the puzzle together:
“Let’s consider, in the evenly rotating economy, a machine
that we know will be rented for $1,000 for the next ten years
and then break down, having produced a $10,000 return. (By
definition, we have absolute certainty as to future prices in the
evenly rotating economy—they will be the same as today’s
prices.) The price paid for such a machine will be less than
$10,000. How do we know that? No one will give up a good
today in order to receive the same good back in the future, all
other things being equal. (And in the evenly rotating econ-
omy, all other things are, of course, equal!) So no one will pay
$10,000 today for a machine that will give him $10,000 over
the next ten years.
Let’s say the machine sells for roughly $6,144. The capital-
ist who buys it can rent it out for $1,000 per year, so he earns
a 10 percent annual return. Where does that 10 percent return
come from?
The answer is apparent from our discussion above: it is a
return for the capitalist’s time, for the patience to forgo cur-
rent consumption and allow one’s resources to be devoted to
future production. If the return on capital is 10 percent in the
evenly rotating economy, that means that 10 percent is the
marginal time preference of the buyers and sellers of future
goods against present goods.”
It continues on and I began to understand it better a little in the next paragraphs, however it caught me again on two examples:
"…Let us say that an entrepreneur buys
the rights to next year’s grape harvest from some vineyard for
$1,000. If the risk-free rate of interest is 5 percent, the entre-
preneur will not consider that he has made a profit unless he
can sell the grapes for more than $1,050. This is because he
could, with less effort and risk, simply lend the money out at 5
percent and have $1,050 at the end of the year…"
and:
"Arbitrage—simultaneously buying and selling goods to
take advantage of price discrepancies between different mar-
kets—will tend to establish a single interest rate for the econ-
omy as a whole. Let’s say that the interest rate on money loans
is currently 5 percent per year. Meanwhile, cattle futures
maturing in one year are selling at a discount to spot (current)
prices, so that for $90.90, an investor can contract for the
delivery of $100 of cattle a year from now. For simplicity’s
sake, we will assume there are no transaction costs, no carry-
ing costs for the cattle, and no possibility of demand or sup-
ply changes in the spot cattle market. Given those assump-
tions, there is a pure arbitrage opportunity available. Investors
can borrow money at 5 percent. They can buy cattle futures
that will return 10 percent. (We have taken as a given that spot
cattle will still be $100 next year, and the $9.10 they will earn
is 10 percent of $90.90.) Investors net the 5-percent difference.
Since they are borrowing the money and making no capital
investment themselves, such arbitrageurs are essentially pick-
ing up money that has been left on the sidewalk. Once that
opportunity has been noticed, investors will rush to take
advantage of it.
The effect of their actions will be twofold. Their demand to
borrow money now to buy the cattle futures will drive the
price of present money higher against future money: the
money interest rate will rise. Conversely, their demand for
future cattle will drive the price of future cattle up against that
of present cattle. Soon enough, the money interest rate will
rise to, say, 6 percent, and the price of the cattle futures to
$94.34. ($94.34 + $5.66 [6 percent of $94.34] = $100.) The arbi-
trage opportunity will vanish."
That entire section on arbitrage threw me off totally from the first definition to its vanishing, as did the parts I bolded, as did pretty much everything I quoted. Can anyone better explain to me the basics of interest rates, perhaps guide me to another example, or perhaps to another article’s explanation? I am a little lost here, and it’s annoying me like hell due to the fact that I understood everything else totally. Can someone help?