Asked by Waseem Nazir on Jun 26, 2024
Verified
The present value equation is:
A) PV = FVt+ (1 + r) t.
B) PV = FVt- (1 + r) t.
C) PV = FVt/[1/(1 + r) t].
D) PV = FVt/(1 + r) t.
E) PV = FVt* (1 + r) t.
Present Value Equation
A mathematical formula used to determine the current value of a future amount of money or stream of cash flows given a specific rate of return.
FV
Future Value, the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
- Identify the distinctions between present value and future value in the realm of finance.
- Employ financial equations and operations to compute current and anticipated values within Excel.
Verified Answer
NA
Neethu AjithJun 30, 2024
Final Answer :
D
Explanation :
The correct formula for present value (PV) is PV = FV / (1 + r)^t, where FV is the future value, r is the rate of return, and t is the time in years. This matches closest with option D, which simplifies to the correct formula structure.
Learning Objectives
- Identify the distinctions between present value and future value in the realm of finance.
- Employ financial equations and operations to compute current and anticipated values within Excel.