is calculating the present value meaning to calculate the "present value of the "past" from the future ?
what is this mean ?
the present value of the 300 dollars to be received in 10 years is 150 dollars.
thanks
2007-03-10 14:40:22 · 3 answers · asked by Lomus 2 in Business & Finance ➔ Investing
The "present value" of a future amount is the discount of that amount using the interest rate that would be applied to a current sum to produce the future value.
Lets say that if you invested 150 dollars and it earns 7% per year, compounded annually. If the amount you would have at the end of 10 years turns out to be $300, you would say that the "present value" of $300 in 10 years using a 7% discount rate, is $150.
It the same thing as saying that the future value of $150 earning 7% a year, will be $300 in 10 years.
2007-03-10 14:48:40 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Definition of present value: The amount that a future sum of money is worth today given a specified rate of return.
If you needed $1,000 in five years, assuming an interest rate of 10%, you would need to invest $620 today. So the present value of the $1,000 is $620.
2007-03-10 23:52:25 · answer #2 · answered by Matt and Diane 2 · 0⤊ 0⤋
Because of inflation (rising prices) what you can buy for 150 dollars today, will take 300 dollars in 10 years.
2007-03-10 23:14:48 · answer #3 · answered by gosh137 6 · 0⤊ 0⤋