[roxmill]

How do I calculate the current value of an amount in the future?

[bbradley]

Texas Instruments BA2Plus (Calculator) Most useful, common, accepted by all college professors of Finance/they actually teach their students on this calculator in relation to the college text books, and yes you will be able to use it on your exams! COST: around $35

Ex1:
-3 yrs to make $30,000
-find investment that pays 16% per yr
-what is the current amount of money you should invest

Use only these keys: type 3 then hit the (N) key (for number of years)
type 16 then hit the (I/Y) key (for Interest Rate)
type 0 then hit the (PMT) key (because this is irrelevant currently)
type 30,000 then hit the (FV) key (for the Future Value)
ANSWER:hit the (CPT)compute key then hit the (PV) key after that
this amount will pop up on your screen=19,219.73
This amount is what you should pay for the investment

IMPORTANT: You can calculate any TIME VALUE OF MONEY scenaro and much more with these easy five keys. The most difficult aspect of these questions is determining what they are asking for.

[morgaine300]

Assuming this is for a class, what method are you required to use to do these? i.e. do you have charts to use, Excel, algebraic equations, or a financial calculator? Or does it matter? (If you have charts and are allowed to use them, that is the easiest method, assuming the numbers you get are on it because they are limited.)

I never use Excel for this so couldn't tell you about that, but both the charts and the equations will require some adjustments if it compounds more than once annually, because you have to do it by compounding periods. i.e. if something compounds quarterly, that's 4 times a year. So you have to divide the interest by 4 to get a per period rate. And then take the years and multiply by 4 to get total number of periods. i.e. 4 x 3 years would be 12 periods.

And financial calculators are different. On mine, N is the number of compounding periods, not years. (i.e. the adjustment above would be necessary, but the rate does not have to be adjusted.) And I don't have a CPT key, and I also have a P/Yr key I have to use. (I do not understand the above instructions where N is the number of years, without a way to tell it how many times it compounds a year. Either N is number of periods, or there's a missed step. Somehow I suspect N is number of periods, not years. But if it's compounding annually, years & periods are the same.)

If you want the equations, I just posted those to someone else the other day:
https://www.askmehelpdesk.com/accoun...ds-193231.html
There's also a bit more in-depth explanation of the rate/time adjustments if it compounds other than annually.

[bbradley]

How do I calculate the current value of an amount in the future?

Again reading and understanding what the question at hand is asking for is vital when calculating TVM. You asked how to calculate the current value or present value of a dollar amount in the future or future value. The question is asking for a single dollar amount or single lump sum. How much should I pay for this invesment today. Your goal is not to pay too much right. That's all! No big deal. Keep these type of problems simple and you will master them in no time.! By the way the 5 key approach was designed to not make human error like skipping steps.