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Finance: Future value and present value
- Lesson: 18:48
- Lesson: 26:20
Finance: Future value and present value
In this section, we will revisit the connection between mathematics and finance, but from a different perspective. We will see how a slight variation of the Compound interest formula can help us understand some of the core concepts in Finance – Future value and Present value.
Related Concepts: Derivative of inverse trigonometric functions, Derivative of logarithmic functions
Lessons
future value and present value: FV=PV(1+nr)nt
FV: Future Value
PV: Present Value
r : Annual interest rate
t: total time given in years
n : number of times compounded in a year, if
FV: Future Value
PV: Present Value
r : Annual interest rate
t: total time given in years
n : number of times compounded in a year, if
Compound daily: |
n = 365 |
Compound monthly: |
n = 12 |
Compound quarterly: |
n = 4 |
Compound semi-annually: |
n = 2 |
Compound annually: |
n = 1 |
- 1.What is the future value of $30,000 which grows at an annual interest rate of 11%, compounded monthly, for three years?
- 2.What is the present value of $15,000 sixteen months from now if the annual discount rate is 10%, compounded quarterly?