What is the current value?

The Primary Director of Finance, known as TVM (TVM), is based on the concept that $ 100 is currently worth more than $ 100 (USD) a year later. This is because someone could currently invest it and have another income earned over the year; This is also the basis for the current value (PV). For example, investing $ 1,000 at an interest rate of five percent in one year would cost $ 1050. If $ 1,000 was received from the current date for one year, it would have to be discounted at a five percent interest rate - it would be $ 952.38, which is determined by a equation of $ 1,000 ÷ 1.05. This is what is called the current value of $ 1,000 at a five percent discount rate. P means the main or cash; Equal to the discount rate; and n represents the number of periods. Therefore, the values ​​from the prissional example involved in this formula would be PV = 1,000 USD /〖(.05)〗 ^^1 = 952.38 USD.

To facilitate finding the current value of many values, this formula was used to create tables of the current value. The amount of principal used in the formula is usually $ 1.00. The decimal decimal school that creates this can be used for any amount of money at a specified discount rate and is known as the factor of the current value (PVIF). The formula for this would be pvif = $ 1.00 / (1.05) = 0.95238. This particular PVIF can be used for any amount of principal for one year at a discount rate of five percent; For example, $ 1,000 x 0.95238 = $ 952.38 and $ 4,500 x 0.95238 = 4285.71 USD.

Calculations of current value are used in many ways for business transaction. They can help one make decisions to finance cars, pay mortgage points or buy the business. In the financial sector, PV helps to determine the spot rates on currency exchanges and value revenues from securities or real estate.