Finite Math Examples

$f = 10000$ , $r = 10 %$ , $t = 5$

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.

$P V = \frac{10000}{{(1 + 10 %)}^{5}}$

Step 3

Simplify the right side.

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Step 3.1

Simplify $\frac{10000}{{(1 + 10 %)}^{5}}$ .

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Step 3.1.1

Simplify the denominator.

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Step 3.1.1.1

Convert $10 %$ to a decimal.

$P V = \frac{10000}{{(1 + 0.1)}^{5}}$

Step 3.1.1.2

Add $1$ and $0.1$ .

$P V = \frac{10000}{{1.1}^{5}}$

Step 3.1.1.3

Raise $1.1$ to the power of $5$ .

$P V = \frac{10000}{1.61051}$

Step 3.1.2

Divide $10000$ by $1.61051$ .

$P V = 6209.21323059$

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