Present value analysis

What is Present Value? Well, the Present Value concept is obtained by adjusting a predicted future worth of any asset at predetermined the discount rate or rate of interest from a familiar future spot in the time which is backward to the asset’s value today. The P.V. analysis is an essential instrument for the investment professionals and is required everyday in their different trading decisions including the investing in the assets.

The Present Value notion allows the investors in calculating the predicted future worth of any asset or say financial equipment in present dollars via the process called discounting. Suppose you are asking “How much would be required to invest in at present if you’re planning to retire with 1 million USD in ten years with a known investment of 12%?” So, here it goes:

Future Value = PV (1+ interest) years

PV= FV 1/(one + interest) years

PV= 1 million USD 1/ (one +12) years

PV= 1 million USD one / (3.1058)

PV= 1 million x .321973

Thus, PV = 321,973 USD


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