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The use of complex math, including exponents, is instrumental in many fields. Exponents are used in scientific, financial and economic applications. Such math is also used to solve problems and make predictions in your personal life as well. One important formula that requires the understanding of exponents is the Present Value Formula.
Present Value, PV, is a widely used formula that calculates the present day value of an amount that is received at a future date.
The Present Value Formula is: PV = FV/(1 + r)^n
PV = PV is the present value that will amount to FV dollars in n years at interest rate r compounded annually.
For this discussion, think of something you want or need that has a future cost between $5,000 and $90,0000. For example, maybe you want to save up for your child's college education or maybe you want to save for a cabin on the lake. Assume you have an investment, which provides between 6% and 11% interest compounded annually, and you want to purchase your desired item in 15 years. What is the present value? In other words, how much money do you need to invest today?
State the following in your discussion:
1) The FV or cost of the desired item in n = 15 years.
2) The interest rate, r, you will earn on your investment (use an annual rate between 6% and 11%)
3) Set up the formula and solve for the present value, PV, showing all work.
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