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Which of the following is the correct formula for computation of Present Value?

Question

Which of the following is the correct formula for computation of Present Value?

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Solution

The correct formula for the computation of Present Value (PV) is:

PV=FV(1+r)n PV = \frac{FV}{(1 + r)^n}

where:

  • PV PV is the Present Value,
  • FV FV is the Future Value,
  • r r is the discount rate (interest rate),
  • n n is the number of periods.

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