Question

1. ____________________ is the amount that a specified sum expect4d to be received or paid in the future is worth today, given the required rate of return. 2. A ___________________ is the result of solving the formula PV = $1 x 1/(1+i)^n for various combinations of I and n. 3. A ___________________ is the result of solving the formula FV = $1 x 1/(1+i)^n for various combinations of I and n.

Answer 1

1.Present Value is the amount that a specified sum expected to be received or paid in the future is worth today, given the required rate of return.

In simple terms, Present value is the today's value of tomorrow's money. It is calculated by discounting the future value using required return.

2. A Present Value is the result of solving the formula PV = $1 x 1/(1+i)^n for various combinations of I and n.

Present value = Future value / (1+ rate per period)^ no. of periods

3. A Future Value is the result of solving the formula FV = $1 x 1/(1+i)^n for various combinations of I and n.

Future value = Present value * (1+ rate per period)^ no. of periods