Homework Help: Finance

Posted by John on Saturday, June 9, 2012 at 11:23am.

Often in personal finance we want to know what our $1 investment today will be worth in 20 years. In business however, there is more concern with answering the question, “If I receive $100 in 5 years, what is that worth today?” To answer this question, modify the formula fv = pv*((1+i)^n) and use the reciprocal. Simply stated, the reciprocal of a number is 1 divided by the number; the reciprocal of 10, for example, is 1/10. In the formula above, we divide both sides by ((1+i)^n), which creates a new formula where the fv is multiplied by the reciprocal of the original: fv*(1/((1+i)^n))=pv. Select an interest rate and number of periods—be sure your numbers are different from other students who already answered this question—to calculate the present value of $100 received in the future. What would the value of $100 in the future be today given the interest rate and number of periods you selected?

Finance - Henry, Sunday, June 10, 2012 at 4:59pm
V = Vp(1+r)^n. APR = 10%.

r = (10%/12) / 100% = 0.00833=Monthly %
rate expressed as a decimal.

n = 1Comp./mo * 60mo = 60 Compounding
periods.

V = Vp(1.00833)^60 = $100
Vp = 100 / (1.00833)^60 = $60.77.

Answer this Question

Related Questions

Finance - If an investment of $5,000 today earns 5% in each of the next five ...
Finance - An investment offers an expected dollar return of $800 each year for ...
Finance - Your friend claims that he invested $5,000 seven years ago and that ...
Corporate Finance - An investment today of $3,3OO is worth $10,000 IN 8 YEARS. ...
Finance - I have been promised a $25,000 car when i graduate in four years. If ...
Finance - I have been promised a $25,000 car when i graduate in four years. If ...
Finance Help! 3 questions - Hi, i was wondering if someone could please help me ...
personal finance - Personal Finance.Why is it important to go through these ...
Finance - You can deposit 10,000 into an account paying 9% annual interest ...
Finance - Omega Health Foundation is considering buying personal computers to ...

For Further Reading

First Name:
School Subject:
Answer: