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April 23, 2021, 08:59:50 pm

### AuthorTopic: annuties  (Read 670 times) Tweet Share

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#### Sarahxx16

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« on: October 03, 2019, 11:11:08 am »
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how do you know what formula to use for present and future forumla.

#### Mia-lexa

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« Reply #1 on: October 03, 2019, 11:29:49 am »
+1
how do you know what formula to use for present and future forumla.

It would be the same formula, except you would substitute in the information that you are given for e.g.
FV=PV(1+r)^n is your formula.

If you were asked to find the future value of an investment that has a present value of $5000 increasing at a rate of 1.5% per year after 5 years, the formula would be: FV=5000(1+1.5%)^5 FV=$5386.42

But if you were asked to find the present value of an investment that at the end of a five year investment that increases by 1.5% per annum has increased to $5000, the formula would be:$5000=PV(1+1.5%)^5
PV=5000/(1+1.5%)^5 (rearranging the formula to make the unknown value the subject)
PV=\$4641.30

Hope that helps! 