State the example to calculate the present value, Financial Management

Assignment Help:

State the Example to calculate the present value

2, 00,000 $ is the amount which you require after 20 years for your retirement. How much must you invest now at 5% per annum compounded yearly?

Solution

Here i = 0.05, FV = 2, 00,000, and n = 20. Putting it in the formula we get:

Present value = 200000 / (1+0.05)20

Solve this or use present value table.

Using present value interest factor table we find that present value of 1 $ of 20 years from now at 5% interest is 0.3769. Multiplying it with future value 2, 00,000 $ we get:

PV = 2, 00,000 x 0.3769 = 75,380 $

 


Related Discussions:- State the example to calculate the present value

Fundamentals of structured product engineering, Fundamentals of Structured ...

Fundamentals of Structured Product Engineering 1. (a) Let r m denote the m month swap rate (or Libor rate). Subsequently the 3 × n month forward rate f (3 ×n )

Municipal bonds, 1. Tax-backed debt and 2. Revenue bonds ...

1. Tax-backed debt and 2. Revenue bonds are two types of municipal bonds.

What do you mean by present value of a future sum, Q. What do you mean by P...

Q. What do you mean by Present Value of a Future Sum? The present value of a future sum will be worth less than the future sum because one foregoes the opportunity to invest an

Objectives of financial services authority, Objectives of financial service...

Objectives of financial services authority FSMA provides four statutory objectives to FSA. They are: Market Confidence: Maintaining confidence in the financial system;

Constructing index numbers - aggregates method, Aggregates Method Unde...

Aggregates Method Under the aggregates method of constructing an index number, we could have unweighted aggregates index and the weighted aggregates index. Unweighted Aggr

Leverage, What is the importance of leverage in business management of a sm...

What is the importance of leverage in business management of a small scale company

OPERATING CYCLE, Discuss the applicability of an operating in vegetable gro...

Discuss the applicability of an operating in vegetable growing business in Uganda.

Find the minimum annual savings, Baldwin Company is interested in buying a ...

Baldwin Company is interested in buying a new corporate jet for $6 million. It will depreciate the jet fully in 5 years and then sell it for $5 million. The jet will use $60,000 in

Regulatory framework abroad, Regulatory Framework Abroad A regulatory m...

Regulatory Framework Abroad A regulatory mechanism, in terms of finance, is the mechanism to regulate the working of the financial system. Its function is to ensure the complia

Cash discount, Which one is true 1.the higher the discount rate the lower ...

Which one is true 1.the higher the discount rate the lower the cost of trade credit 2.the higher the discount rate the higher the cost of trade credit 3.cost of trade credit duri

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd