Finite Math Examples

f = 4000

$f = 4000$ ,

r = 1 %

$r = 1 %$ ,

t = 2

$t = 2$

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}}

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

Step 2

Substitute the values into the formula.

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

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

Step 3

Simplify the right side.

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Step 3.1

Simplify

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

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

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Step 3.1.1

Simplify the denominator.

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Step 3.1.1.1

Convert

1 %

$1 %$ to a decimal.

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

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

Step 3.1.1.2

Add

1

$1$ and

0.01

$0.01$ .

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

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

Step 3.1.1.3

Raise

1.01

$1.01$ to the power of

2

$2$ .

P V = \frac{4000}{1.0201}

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

P V = \frac{4000}{1.0201}

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

Step 3.1.2

Divide

4000

$4000$ by

1.0201

$1.0201$ .

P V = 3921.18419762

$P V = 3921.18419762$

P V = 3921.18419762

$P V = 3921.18419762$

P V = 3921.18419762

$P V = 3921.18419762$

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