What is the discounted future value?
discounted future value is the time value of the money technique that takes the future amount of the dollar and states value to the current dollars. The purpose of this technique is to compare the dollar to the dollar. The dollar today does not have the same value of the dollar in the future, probably due to inflation that disrupts the purchasing power of the dollar. The basic formula allows individuals to determine the discounted future of a single or several amounts of money from the future period. Various changes are possible to create a formula that best suits the situation. Here the main amount of the main dollar placed on a savings account or investment over time increases money, which increases the amount of the basic principal. In most cases, simple interest contributes to the basic amount annually, while the compound interest adds to the basic director plus a yearly asserted interest. The discounted future value works backwards, and the final amount of the dollar is frightened, stored or generated from activity and finds what the principle is necessary to create a future value. AcrossIf an investor longs for a final value of $ 10,000 USD (USD) for buying shares, he can reduce his discounted future value, the amount that the principal is to invest right now.
Future value formula for one amount of dollar has two different basic formulas, one for simple interest and one for the interest. For simple interest calculations, the individual should divide the amount of principal by one plus an interest rate than the number of periods that the investment can withstand. An example is the main investment of $ 100,000, which lasts 10 years with an eight percent interest rate. The mathematical formula is $ 100,000 / [1 + (10 * 0.08)], resulting in a discovered future value of $ 5555. In short, investing the amount of principal $ 55,555 using the above data will lead to a future value of $ 100,000 in $ 10.
discounted future value for compound interest is slightly different. The denominator of the formulaE is one plus interest rate divided by the number of time interest compounds per year, increased to the power of the total investment period, which is due to the number of interest compounds each year. So the mathematical formula - using the above information - looks as follows: $ 100,000 / [1 + (0.08 / 12) 10 * 12]. Interest for this investment is expected to combine 12 times a year, ie monthly. The discounted future value is then $ 45, $ 053 for this investment, which is of the same meaning as the discounted amount above.