Question

Need some help with present value calculations

Answer 1

𝐹𝑉 = 𝑃𝑉 × (1 + 𝑖)\[PV = FV (\frac{ 1 }{ 1+i })^n\]

Needing to use this formula

Answer 2

Isn't that the FV of a monetary account equation?

It says to use PV calculations. Did I use the wrong formula?

Answer 3

\[FV=PV(1+i)^n\]
\[FV=300(1+\frac{ 5 }{ 100 })^1\]
\[FV=300\times \frac{ 105 }{ 100 }=315\]

Answer 4

\[FV=600(1+\frac{ 5 }{ 100 })^1=600\times \frac{ 105 }{ 100 }=630\]

Answer 5

he will prefer 675 $ in two years rather than 600$ after one year.

Answer 6

@surjithayer it asked specifically for PV calculations. are the formulas you used in relation to what it's asking?

Answer 7

in that case
\[305=PV(1+\frac{ 5 }{ 100})^1=PV \times \frac{ 21 }{ 20 }\]
\[PV=305\times \frac{ 20 }{ 21 }\approx 290.48\]
a. so $300 ~is~better~than~$290.48~after~one~year.
c.
\[675=PV(1+\frac{ 5 }{ 100 })^1=PV \times \frac{ 21 }{ 20 }\]
\[PV=675\times \frac{ 20 }{ 21 }\approx $ 642.86\]
so~675~is~better~after~2~years~than~600~after~1~year.