Introduction to Valuation: The Time Value of Money - Present Value and Discounting

4 important questions on Introduction to Valuation: The Time Value of Money - Present Value and Discounting

What is the present Value (PV) in single period case? When you have 10% intrest and wnat to get 1$ per year

Present value *1.1=1$
Present value = $1/1.1=0.909
This is what we call discounting it back to the present
(discount = calculate the present value for some future amount)

Pic explains more about the present value of an amount to be paid in 2 or more periods into the future

When looking at present values for multiple periods when you know 1000 in 2 years. If you can earn 7% how much do you have to invest to make sure you have the 1000 when you need it?

Calculating present values are quite similar to calculating future values, and the general result looks much the same

Are calculating present values quite similar to calculating future values?

Yes, and the general result looks quite the same. The present value of £1 to be received t periods into the future at a discount rate of r is.
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This is the present value How do you write this in a simple way?

y  1/(1+r)t

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