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

Explain the aspects of financing decision, Explain the aspects of financing...

Explain the aspects of financing decision The financing decision covers two interrelated aspects: (1) capital structure theory (2) capital structure decision.

Margining system, Margining System: Indian capital markets have finally...

Margining System: Indian capital markets have finally acquired an international flavor with the market-wide rolling settlement coming into place on both the premier exchanges (

Explain banks circumtances to impose compensating balances, What are compen...

What are compensating balances and why do banks require them from some customers?  Under what circumstances would banks be most likely to impose compensating balances? Compensa

Multi-period compounding or else future value, Multi-period Compounding or ...

Multi-period Compounding or else Future Value :- If the company determination compounding interest half-yearly (semi-annually) instead of annually then investors will gain as he wi

Arbitrage-free valuation approach, The main drawback of the tradition...

The main drawback of the tradition approach of valuation is that it discounts every cash flow using the same discount rate. For example, let us take 5-year (7.00 per ce

What is the basic goal of a business, What is the basic goal of a business?...

What is the basic goal of a business? The primary financial goal of the business organizations is to maximize the wealth of the firm's owners.  In turn Wealth refers to value.

Determine the cost of capital in emerging nation, How can we measure a comp...

How can we measure a company's cost of capital in emerging nations, especially when there is no state bond which we could take as a reference? Although there is no state bond w

Determine the cost, a) Social marketing is the use of normal marketing meth...

a) Social marketing is the use of normal marketing methods to achieve the benefits of social change, such as informing the public about the harm of under-age drinking, rather than

What are the objectives of financial management, What are the Objectives of...

What are the Objectives of Financial Management To make wise decisions a clear understanding of the objectives that are sought to be achieved in compulsory. Objectives provide

How does continuous compounding benefit an investor, How does continuous co...

How does continuous compounding benefit an investor? The effect of enhancing the number of compounding periods per year is to increase the future value of the investment.  The

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