Relationship Between FV and PV

Relationship Between FV and PV - FV - PV - PV rt A Quick...

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Relationship Between FV and PV The two formulas are opposites: If the FV formula is: FV = PV(1 + r ) t then, the PV formula is: PV = FV/(1 + r ) t 1
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Time Value of Money 2 Growth Rate: Discount Rate:
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Present Value Suppose you need $10,000 in 10 years and can earn 6.5%. What do you need to invest today? PV = FV/(1 + r ) t = ($10,000)/(1.065) 10 3
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The Discount Rate Present Value Factor = 1/(1 + r ) t This is also called the discount rate , and will be used extensively for the rest of the course. 4
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Summary of Formulas 5 Simple Interest Compound Interest Future Value FV = PV(1+ rt ) FV = PV(1+ r ) t Present Value PV = FV/(1+ rt ) PV = FV/(1+ r ) t Total Interest FV - PV FV - PV Simple Interest PV rt PV rt Compound Interest N/A
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Unformatted text preview: FV - PV - PV rt A Quick Illustrative 6 Simple Interest Compound Interest Future Value FV = PV(1+ rt ) FV = PV(1+ r ) t Present Value PV = FV/(1+ rt ) PV = FV/(1+ r ) t Total Interest FV - PV FV - PV Simple Interest PV rt PV rt Compound Interest N/A FV - PV - PV rt Principal $10,000 Simple Interest Compound Interest Rate 0.05 Future Value $13,500 $14,071 Time 7 Present Value $10,000 $10,000 Total Interest $3,500 $4,071 Simple Interest $3,500 $3,500 Compound Interest $0 $571 Variations of the Formula If FV = PV(1 + r ) t and PV = FV/(1 + r ) t , the algebraic rearrangements to solve for r and t are: 7...
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This note was uploaded on 01/24/2012 for the course FIN 4260 taught by Professor Victorwakeling during the Spring '12 term at Kennesaw.

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Relationship Between FV and PV - FV - PV - PV rt A Quick...

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