Finite Math Examples

$f = 1000$ , $r = 4.5$ , $t = 20$

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.

$P V = \frac{1000}{{(1 + 4.5)}^{20}}$

Step 3

Simplify the right side.

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Step 3.1

Simplify $\frac{1000}{{(1 + 4.5)}^{20}}$ .

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Step 3.1.1

Simplify the denominator.

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Step 3.1.1.1

Add $1$ and $4.5$ .

$P V = \frac{1000}{{5.5}^{20}}$

Step 3.1.1.2

Raise $5.5$ to the power of $20$ .

$P V = \frac{1000}{641584391529617}$

Step 3.1.2

Cancel the common factor of $1000$ and $641584391529617$ .

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Step 3.1.2.1

Rewrite $1000$ as $1 (1000)$ .

$P V = \frac{1 (1000)}{641584391529617}$

Step 3.1.2.2

Cancel the common factors.

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Step 3.1.2.2.1

Rewrite $641584391529617$ as $1 (641584391529617)$ .

$P V = \frac{1 \cdot 1000}{1 \cdot 641584391529617}$

Step 3.1.2.2.2

Cancel the common factor.

$P V = \frac{1 \cdot 1000}{1 \cdot 641584391529617}$

Step 3.1.2.2.3

Rewrite the expression.

$P V = \frac{1000}{641584391529617}$