Finite Math Examples

$f = 2000$ , $r = 1 %$ , $t = 3$

Step 1

Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.

$P V = \frac{f}{{(1 + r)}^{t}}$

Step 2

Substitute the values into the formula.

$P V = \frac{2000}{{(1 + 1 %)}^{3}}$

Step 3

Simplify the right side.

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Step 3.1

Simplify $\frac{2000}{{(1 + 1 %)}^{3}}$ .

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Step 3.1.1

Simplify the denominator.

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Step 3.1.1.1

Convert $1 %$ to a decimal.

$P V = \frac{2000}{{(1 + 0.01)}^{3}}$

Step 3.1.1.2

Add $1$ and $0.01$ .

$P V = \frac{2000}{{1.01}^{3}}$

Step 3.1.1.3

Raise $1.01$ to the power of $3$ .

$P V = \frac{2000}{1.030301}$

Step 3.1.2

Divide $2000$ by $1.030301$ .

$P V = 1941.18029585$

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