QRB/501 Week 4 DQ CHEAP Substantive Post

QRB/501 Week 4 DQ CHEAP Substantive Post

While it is fun to look at what $1 today will be in 20 years,inbusiness we are more often concerned with the question, If Ireceive $100 in 5years, what is that worth today? We can find that answer bymodifying theformula from DQ 1 and using the reciprocal. Simply put, thereciprocal of anumber is 1 divided by the number. The reciprocal of 10 is 1/10. Inthe formulaabove, we divide both sides by ((1+i)^n). Thiscreates a new formula where thefv is multiplied by the reciprocal ofthe original:fv*(1/((1+i)^n))=pv. Using thesame interest rate andnumber of periods above, what would the value of $100 in the futurebe today?


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