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tristatefabricatorsinc
07-17-2006, 10:05 PM
The future value of an amount of money is said to be the value of the amount of money that is allowed at an interest rate over time, and is given by the formula...

FV = PV(1+i)^n

FV = future value
PV = present value
i = the interest rate
n = the number of years (periods)

Find the present value that will have produced $15,000 ten years from now if that present value will earn 10% annual interest (commonly referred to as the discount rate) for the next ten years.

Here is my work so far...

15,000 = PV(1 + .10)^10

I know I need to solve for PV, I am unsure how to continue, can someone give me a hint on the next step?

Thanks!

daon
07-17-2006, 11:26 PM
...

Here is my work so far...

15,000 = PV(1 + .10)^10

I know I need to solve for PV, I am unsure how to continue, can someone give me a hint on the next step?

Thanks!

You're just about there...

15000 = PV(1.1)^10
15000 = PV(2.5937)

tristatefabricatorsinc
07-17-2006, 11:40 PM
so...

15000 = PV(1.1)^10

15000 = PV(2.5937)

15000
------- = PV
2.5937

PV = $5,783.24

Is this correct?

Thanks for the assistance!

Denis
07-18-2006, 04:30 AM
Correct!
You should use P (not PV) and F (not FV); like, PV means P * V.

tristatefabricatorsinc
07-18-2006, 06:06 AM
Thanks for the tip! I appreciate all the help!