Saturday, July 7, 2012

Calculate Present Value of Security

How to calculate the present value of a security held for investment purposes:

What is the present value of an investment  security that will pay $5,000 in 20 years if securities of equal risk available on the market pay 7% annually?  


Future Value   =          $5,000
Years               =          20
Discount %      =          7%

Use the following equation to calculate present value:

Present Value =          Future Value X (Present Value Interest Factor (PVIF) )
                        =          $5,000             X (1/1.07) ^ 20 years
                        =          $5,000 X 0.258
                        =          $1,290

No comments:

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.