Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

What is the present value of \$500 to be received in 15 years if the annual interest rate is 4.5\% compounded annually?

\$255.13

\$350.00

\$420.00

\$250.13

Previous problemNext problem

Verified step by step guidance

Understand the concept of present value: Present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the annual interest rate, and n is the number of years.

Identify the given values from the problem: Future Value (FV) = $500, annual interest rate (r) = 4.5% or 0.045, and the number of years (n) = 15.

Convert the annual interest rate into decimal form: r = 4.5% = 0.045.

Substitute the values into the present value formula: PV = 500 / (1 + 0.045)^15. Use MathML to represent the formula:

PV = \frac{500}{(1 + 0.045)^{15}}

Simplify the denominator by calculating (1 + 0.045)^15. Then divide 500 by the resulting value to find the present value. This step involves using a calculator or software to compute the exponentiation and division.