Finite Math Examples

$f = 1000$ , $r = 5 %$ , $t = 3$

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.

$P V = \frac{1000}{{(1 + 5 %)}^{3}}$

Step 3

Simplify the right side.

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Simplify $\frac{1000}{{(1 + 5 %)}^{3}}$ .

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Simplify the denominator.

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Convert $5 %$ to a decimal.

$P V = \frac{1000}{{(1 + 0.05)}^{3}}$

Add $1$ and $0.05$ .

$P V = \frac{1000}{{1.05}^{3}}$

Raise $1.05$ to the power of $3$ .

$P V = \frac{1000}{1.157625}$

Divide $1000$ by $1.157625$ .

$P V = 863.83759853$

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