answersLogoWhite

0


Best Answer

The relationship is that present value is the current value of future cash flows discounted at the appropriate discount rate. Future values are the amount a present value investment is worth after one or more periods. We learn everything we can in the present so we have some of the answers for the future and what we don't know we ask the pros about. The difference between the two is contributed by time. The value of something (an asset) may typically increase over a period of time. $100 that you give me today is not the same as $100 you give a year later. There is an interest (or return) that accrues when you pay me $100 a year later. The future value after n years of an amount P where R is the rate of interest (in percentage) is calculated as P(1+R/100)**n : using compound interest. If R =50 (that is 50% rate of return, I know it is high) and n = 2 years, the future value of P is P*1.5*1.5=2.25P where is today's value. The Present value can be calculated from the future value as P = F/( (1+R/100)**n )

It is necessary to measure the value of an amount that is allowed to grow at a given interest over a period. This is how the future value is determined.

User Avatar

Wiki User

โˆ™ 2009-07-23 05:24:52
This answer is:
๐Ÿ™
0
๐Ÿคจ
0
๐Ÿ˜ฎ
0
User Avatar
Study guides
๐Ÿ““
See all Study Guides
โœ๏ธ
Create a Study Guide

Add your answer:

Earn +20 pts
Q: What is the relationship between present and future value?
Write your answer...
Submit
Related questions

Is the present value factor the exponent of the future value factor?

The present value factor is the exponent of the future value factor. this is the relationship between Present Value and Future Value.


What is the relationship between interest rate with present value and future value?

direct


What is the relationship between present value factor and annuity present value factor?

Present value annuity factor calculates the current value of future cash flows. The present value factor is used to describe only the current cash flows.


The present value of future cash flows has what relationship to interest rate?

The present value of future cash flows is inversely related to the interest rate.


What is the relationship between pvif and pvifa?

PVIF (Present Value Interest Factor) is a table which shows the present value of sum which will be realiseed in the future. PVIFA (Present Value Interest Factor of Annuity) is similar to a PVIF but tailored to one or a group of Annuities.


How is the future value related to the present value of a single sum?

The present value is the reciprocal of the future value.


How do you compute present and future value of a cash flow stream?

Future Value = Value (1 + t)^n Present Value = Future Value / (1+t)^-n


How do you find future value of share if you have present of it?

F = Future value P = Present Value i = Intrest Rate n = no. of years Therefore, the formula for future value of present amount :- F= P (1+i)n


What is the reason for negative relationship between bond price and yield?

The Present Value (value now) of a fixed cashflow, paid in the future is calculated using the following formula; Present Value = Cashflow/(1+ yield) As the yield rises, the PV falls.


What effect do interest rates have on the calculation of future and present value How does the length of time affect future and present value How do these two factors correlate?

What effect do interest rates have on the calculation of future and present value, how does the length of time affect future and present value, how do these two factors correlate.


How do you define the value of value?

I need a answer how do you know when to use future value or present value and future value of a annuity and present value of annuity Please help


What is the difference between compounding and discounting?

Compounding finds the future value of a present value using a compound interest rate. Discounting finds the present value of some future value, using a discount rate. They are inverse relationships. This is perhaps best illustrated by demonstrating that a present value of some future sum is the amount which, if compounded using the same interest rate and time period, results in a future value of the very same amount.


What is the difference between present value interest factors versus future value interest factor?

The Present Value Interest Factor PVIF is used to find the present value of future payments, by discounting them at some specific rate. It decreases the amount. It is always less than oneBut, the Future Value Interest Factor FVIF is used to find the future value of present amounts. It increases the present amount. It is always greater than one.


What is the future value of a growing annuity with a present value?

The present value is what it is worth today minus any surrender charges. The future value is what it will be worth in the future at a given interest rate and again minus any surrender charges if applicable.


What is the definition for present value in the financial mathematics?

Present value in the value that the money has currently, not the value it will have in the future. Present value does not include the sum of the money from interest that is being accrued.


What is the current value of a future sum called?

It is called the present value.


What is the difference between present values and future values?

Present Value ------------------- You know what something WILL be worth in the future, and you want to find out what it should sell for today. Future Value ------------------- You know how much something is worth now, and you want to find out what it will be worth in the future.


What happens to the present value of an annuity if the future value of an annuity is increased?

It increases


What is a present value calculator?

A present value calculator is a calculator that is used to figure out the future value of something based on constant payments and interest rates. It helps to calculate the present value as well.


If you want to find the present value of an investment you should choose the financial function?

You can use the PV function or the NPV function. Present Value is the result of discounting future amounts to the present. Net Present Value is the present value of the cash inflows minus the present value of the cash outflows.


What is a present value calculator used for?

According to the dictionary, a present value calculator calculates the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.


More than one net present value?

The present value depends on assumptions made about interest or inflation rates for the future.


Get cash when you need it?

an asset could be valued at the present value of its future inflows


Difference between present value and net present value?

Present value is the result of discounting future amounts to the present. For example, a cash amount of $10,000 received at the end of 5 years will have a present value of $6,210 if the future amount is discounted at 10% compounded annually.Net present value is the present value of the cash inflows minus the present value of the cash outflows. For example, let's assume that an investment of $5,000 today will result in one cash receipt of $10,000 at the end of 5 years. If the investor requires a 10% annual return compounded annually, the net present value of the investment is $1,210. This is the result of the present value of the cash inflow $6,210 (from above) minus the present value of the $5,000 cash outflow. (Since the $5,000 cash outflow occurred at the present time, its present value is $5,000.)


The present value of the expected future cash flows of an asset represents the asset's?

intrinsic value