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# Which option would you take fv pv 1 i n o fv future

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Unformatted text preview: ich option would you take? FV= PV (1 + i) N o FV = Future Value o PV = Present Value o i = the interest rate per period o n= the number of compounding periods (Do you understand āNā? It means to the power of.. 52=25. 33=27) What is the future value of \$34 in 5 years if the interest rate is 5%? o FV= PV ( 1 + i ) N FV= \$ 34 ( 1+ .05 )5 FV= \$ 34 (1.2762815) FV= \$43.39. You can go backwards too. I will give you \$1000 in 5 years. How much money should you give me now to make it fair to me? You think a good interest rate would be 6% (You just made that number up). o FV= PV ( 1 + i ) N \$1000 = PV ( 1 + .06) 5 \$1000 = PV (1.338) \$1000 / 1.338 = PV \$ 747.38 = PV ā O.K. so you give me \$ 747.38 today and in 5 years I'll give you \$1000. Sound fair?? You will get 6% interest on your money. 54...
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