Question

What is meant by the present value of money?​

Answer 1

Answer: Present value, also known as discounted value, is a financial calculation that measures the worth of a future amount of money or stream of payments in today’s dollars adjusted for interest and inflation. In other words, it compares the buying power of one future dollar to purchasing power of one today

Explanation:

Answer 2

Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

How to find PV:Calculating present value is called discounting. Discounting cash flows, like our $25,000, simply means that we take inflation and the fact that money can earn interest into account.

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Calculating Present Value Using the Formula

FV = the future value.

i = interest rate.

t = number of time periods.

Explanation: