Present Value of Compounded Value Formula

Present Value of Compounded Value Formula

Present value of compounded value can be calculated by the following simple formula

Present Value       = Compounded Value/e^rt

E=2.718

r= Rate of interest

t= compounding time

Example

Amount = 10,000

Compound interest= 12%

Period =3 Years

Compounded Value = 10,000x (1+12%)³=14049

Solution

Present Value       = Compounded Value/e^rt

=14,049/(2.718)^(.12)(3)

=14,049/(2.718)^.36

=14,049/1.4333

=9800