Finite Math Examples Mathematics of Finance

Find the Present Value

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

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.

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

Step 3

Simplify the right side.

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Step 3.1

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

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Step 3.1.1

Simplify the denominator.

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Step 3.1.1.1

Convert $5 %$ to a decimal.

$P V = \frac{1000}{{(1 + 0.05)}^{5}}$

Step 3.1.1.2

Add $1$ and $0.05$ .

$P V = \frac{1000}{{1.05}^{5}}$

Step 3.1.1.3

Raise $1.05$ to the power of $5$ .

$P V = \frac{1000}{1.27628156}$

Step 3.1.2

Divide $1000$ by $1.27628156$ .

$P V = 783.52616646$

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Find the Present Value

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