Section 3
Present Value, Single Amount
Book
Version 3
By Boundless
By Boundless
Boundless Finance
Finance
by Boundless
5 concepts
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Single-Period Investment
When considering a single-period investment, n is one, so the PV is simply FV divided by 1+i.
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Multi-Period Investment
Multi-period investments require an understanding of compound interest, incorporating the time value of money over time.
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The Discount Rate
Discounting is the procedure of finding what a future sum of money is worth today.
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Number of Periods
The number of periods corresponds to the number of times the interest is accrued.
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Calculating Present Value
Calculating the present value (PV) is a matter of plugging FV, the interest rate, and the number of periods into an equation.