.

Present Value
the present value of a single cash flow
can be written as follows:
PV = FVn / (1 + i)n
PV
the present value (or initial principal)FVn
future value at the end of n periodsi
the interest rate paid each periodn
the number of periods
 Present value (PV) is the current worth of a future
sum of money or stream of cash flows given a
specified rate of return.Future cash flows are
discounted at the discount rate, and the higher
the discount rate, the lower the present value of
the future cash flows.
Example:1

the government offered to pay you Rs150,000 in

five years. You determine that you can invest
today in a five-year government note that yields
8.5%. What is the present value of this government
offer?
Ans:Rs 99,756.81
Future Value