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

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.

[azadehk]

Thanks a lot,
I have Finance course this semester and I am using some of your videos. maybe I don't put comment for all of them but for sure, I pressed "Like" for those I have watched to appreciate your effort.

[topcuka]

You wouldn't believe how much these videos have helped. I study business and I love business But I SUCK AT MATH. Every time teachers explain this stuff I'm left mouth open in awestruck but this - this is amazing. Thanks again!

[kylelane]

The best part about these videos: short and snappy!
My MBA tutor is soporific!

[xbsoft]

I really appreciate your ability to explain the topic very slowly, patiently, and very professionally.

These things can be really confusing, but now I understand much better. Thanks!

[nzcatz]

What was the answer by the way? I want to see if I worked it out :)

[nats]

True. Many people are thrown off, can't differentiate between present value and future value. Sometimes, you have to think twice, pay real attention to the wordings.

[MBAbullshit]

Glad you find it easy enough for everyone to learn, that's the point! cheers!

[blessedbythebest_]

Hi, for an example if PV =410.71, FV=1817.91, NUMBER OF PERIODS =17, HOW CAN I FIND THE INTEREST RATE ON A TI83PLUS CALCULATOR? Thanks

[pperez]

These videos are so good and the way of teaching is simple and funny so everybody can learn with it.

[TheAmjadkhan]

@MBAbullshitDotCom : Thanks alot sir.. you are like a true mentor even you are not physically present in front me. Being a Maths dumbo i really appreciate the extra care and effort you are taking for making us understand in lucid language. I pray you continue the fantastic job.

[opheliamoonstone]

I have to take microeconomics as a prerequisite for my master's level Urban Planning degree and while I don't suck at math, I don't enjoy it either... thanks for existing.

[TheLoveispure]

awesome and magnificent...there is nothing in this world more precious to get your doubts answered in a such a straightforward manner. More precious than a lottery...keep up the good

[MBAbullshit]

@rouba Your gratitude is highly appreciated.

[jasonpundek]

Why must 1 be added to R in the second variable?

[priyeshbagh]

dude your teaching skills are gr8...upload more videos like dis

[CoolobiTj]

Awe-somatic!!! Universities should hire this kind of teachers!

[aishakhan]

is this compound interest ? because the formula taught to us is PV equals FV(1+r)^n then y u using negative n ...I am super confused..please help!!

[PhilKlumpp]

Why does my teacher use division in his formula for "Present Value"? It's obviously an algebra move, but why does he call it present when he switches the formula around?

[GingAzaravlog]

Thank you for sharing this it's help a lot

[charltonlee]

thanks, my teacher explained this like a scientist. its super easy lmao