Finite Math Examples

$f = 4000$ , $r = 1 %$ , $t = 2$

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.

$P V = \frac{4000}{{(1 + 1 %)}^{2}}$

Step 3

Simplify the right side.

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Step 3.1

Simplify $\frac{4000}{{(1 + 1 %)}^{2}}$ .

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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.

$P V = \frac{4000}{{(1 + 0.01)}^{2}}$

Step 3.1.1.2

Add $1$ and $0.01$ .

$P V = \frac{4000}{{1.01}^{2}}$

Step 3.1.1.3

Raise $1.01$ to the power of $2$ .

$P V = \frac{4000}{1.0201}$

Step 3.1.2

Divide $4000$ by $1.0201$ .

$P V = 3921.18419762$

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