Finite Math Examples

$f = 5000$ , $r = 7 %$ , $t = 4$

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.

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

Reorder $1$ and $r$ .

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

Substitute the values into the formula.

$P V = \frac{5000}{{((7 %) + 1)}^{4}}$

Simplify the right side.

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Simplify the denominator.

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Convert $7 %$ to a decimal.

$P V = \frac{5000}{{(0.07 + 1)}^{4}}$

Add $0.07$ and $1$ to get $1.07$ .

$P V = \frac{5000}{{(1.07)}^{4}}$

Remove parentheses around $1.07$ .

$P V = \frac{5000}{{1.07}^{4}}$

Raise $1.07$ to the power of $4$ to get $1.31079601$ .

$P V = \frac{5000}{1.31079601}$

Divide $5000$ by $1.31079601$ to get $3814.4760602376$ .

$P V = 3814.4760602376$

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