Find the present value, using the present value formula and a
calculator.
Achieve $1,000 in five years at 8% simple interest.
| The formula for calculating present value of a future amount using a simple interest rate is as under, | |||||||||
| P = A / (1+nr) | |||||||||
| P = The present value of the amount to be paid in the future = ? | |||||||||
| A = The amount to be paid = $1000 | |||||||||
| r = The interest rate = 8% | |||||||||
| n = The number of years from now when the payment is due = 5 | |||||||||
| P = 1000 / (1+[5 * 0.08]) | |||||||||
| P = 1000 / 1.04 | |||||||||
| P = 714.29 | |||||||||
| Present value = $714.29 | |||||||||
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