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Present Value - Finance

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You are going to be given $45,000 in 7 years. Assuming an interest rate of 2.5%, what is the present value of this amount?

Feb 23rd, 2015

Assuming compound interest

FV = PV(1+r/100)^n

where, FV = Future value = $45,000
PV = Present Value
rate r = 2.5
n = no, of terms = 7

PV = 45000/(1+0.025)^7 = $ 37,856.94


Assuming simple Interest

FV = PV+ PV*r*n/100
FV =PV(1+r*n/100)
PV = FV/(1+r*n/100) = 45000/(1+7*2.5/100) = 45000(1+0.175) =38297.87


Please select my answer as best if it was helpful to you.

Feb 23rd, 2015

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