2 Easy Steps: Present Value and Future Value Calculation with Present Value Formula

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Exactly what is Present Value and how will you utilize the Present Value Formula? In the event that you already understand the idea of Future Value, you will be able to easily understand Present Value.

Exactly what is the "Present Value" of today's $100? It's also $100! Why? Because "present" means "today". Thus, it is $100 today (present value), and after earning interest, it may become $105 the following year (future value).

Let's say that one year ago, this money was only a little more than $95, and then it earned interest all through the year, and now it's valued at$100. Exactly which is the "Past Value" of your $100? Again, very straightforward! It is $95.

So... with regard to your $100 right now, Present Value is $100, Past Value is $95, and the Future Value is $105. However, that was quite a simple example to point out the concept.

The important challenge in school as well as actual business is learning the specific number of your Future Value, Present Value, and Past Value, using scary looking but very simple formulas.

The Present Value or Past Value Formula, simplified, resembles this:

Present Value or Past Value = (1 interest rate)^n

Where n = number of years.

Don't be alarmed. You might prefer to watch it in action in the video above and you'll see how easy it is to use it.

Just about the most confusing thing regarding the Present Value and Past Value concepts is that in many different business schools also with numerous books, Present Value and Past Value are explained almost like they're exactly the same thing. However, they are not. They are very different! Why the confusion?

Because they definitely utilize the same formula. However, the result of the formula will allow you compute either the present value or the past value, depending on how the story is told.

http://www.youtube.com/watch?v=zR3L5mLTi7s

Видео 2 Easy Steps: Present Value and Future Value Calculation with Present Value Formula канала MBAbullshitDotCom