Present versus Future Value

What we called the present value factor is just the reciprocal of (that is, 1 divided by) the future value factor:

Future value factor = (1 + r)t Present value factor = 1/(1 + r)t

In fact, the easy way to calculate a present value factor on many calculators is to first calculate the future value factor and then press the "1/x" key to flip it over.

If we let FVt stand for the future value after t periods, then the relationship between future value and present value can be written very simply as one of the following:

0 0

Post a comment