- Budgeting
- Cash Management
- Consumer and Mortgage Loans
- Debt and Debt Reduction
- Time Value of Money 1: Present and Future Value
- Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
- Insurance 1: Basics
- Insurance 2: Life Insurance
- Insurance 3: Health, Long-term Care, and Disability Insurance
- Insurance 4: Auto, Homeowners, and Liability Insurance
- The Home Decision
- The Auto Decision
- Family 1: Money and Marriage
- Family 2: Teaching Children Financial Responsibility
- Family 3: Financing Children’s Education and Missions
- Investments A: Key Lessons of Investing
- Investments B: Key Lessons of Investing
Case Study #1 Answer
The formula is PV = FV/ (1 + i)n, or PV = 500,000/ (1.06)40, or $48,611.10. This formula shows you how this equation would be calculated on a standard calculator.
Using a financial calculator, you would clear your memories and then enter the following information:
$500,000 = FV
6% = I, which is the interest rate (the annual interest, or discount, rate)
40 = N, or the number of years
You would then solve for PV:
PV = the present value, in today’s dollars, of a sum of money that you have invested or plan to invest. If you use a financial calculator for this equation, the present value should come out as $48,611.10.
