SOLUTION: Often in personal finance we want to know what our $1 investment today will be worth in 20 years. In business however, there is more concern with answering the question, �If I rece

Question 439165: Often in personal finance we want to know what our $1 investment today will be worth in 20 years. In business however, there is more concern with answering the question, �If I receive $100 in 5 years, what is that worth today?� To answer this question, modify the formula fv = pv*((1+i)^n) and use the reciprocal. Simply stated, the reciprocal of a number is 1 divided by the number; the reciprocal of 10, for example, is 1/10. In the formula above, we divide both sides by ((1+i)^n), which creates a new formula where the fv is multiplied by the reciprocal of the original: fv*(1/((1+i)^n))=pv. Select an interest rate and number of periods�be sure your numbers are different from other students who already answered this question�to calculate the present value of $100 received in the future. What would the value of $100 in the future be today given the interest rate and number of periods you selected?

Answer by robertb(5830) (Show Source): You can put this solution on YOUR website!
Let r = 5% with interest compounded monthly (m = 13) for t = 5 years.
==> i = r/m = 0.05/13 = 0.003846, and
n = mt = 13*5 = 65.
Then fv = 100, and so

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