Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%?
P = Po + Po*r*t = $15,000.
Po + Po*0.07*1 = 15,000.
1.07Po = 15,000.
Po = 14,018.69 = Present value.