Friday, 2 October 2015

Present value of single sum problem

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?

FV=$45000   n=7yrs   r=2.5%

FV=PV*(1+r)^n

45000=PV(1.025)^7

45000=PV*1.188685

PV=45000/1.188685

PV=37856.95


PV=$37857