Present Value of a Single Sum - Savings Example

Audio Transcript

What amount should be deposited in a bank account today to grow to $15,000 three years from today? Use an interest rate of 8.5%.

Compute the present value of a future amount. Enter the known variables.

The future value, FV, is $15,000.

The rate is 8.5%

The number of periods, NPER, is 3

We go to the Formulas tab and select the PV function. The Function Wizard pops up.

We click on RATE.

We click on NPER.

We click on FV.

Click OK.

The present value, PV, is -$11,744. The negative amount indicates an outlay of cash.

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