Present Value Formula
Present Value = FV / (1 + i)n
1.PV = the value at time zero
2.FV = the value at time n
3.i = the discount rate (or interest rate)
4.n = the number of periods
Present Value Example
Chase would like to have $500 in todays value, in 2 years from now. He is considering using a bank that offering 6%, how much does he need to put in the account today to have $500 when his 2 years is completed?
He will need $444.998 in order to reach $500 2 years from now.