Present Value of a Single Cash Flow

Present value of a single cash flow refers to how much a single cash flow in the future will be worth today. The present value is calculated by discounting the future cash flow for the given time period at a specified discount rate.

The formula for calculating future value is:

Example

Calculate the present value (FV) of a payment of $500 to be received after 3 years assuming a discount rate of 6% compounded semi-annually.

FV = 500/((1+6%/2)^(2*3)) = $418.74

We can also solve this problem using the calculator as follows:

In our above example, enter FV = 500, change P/Y = 2 (semi-annual compounding), I/Y = 6, N = 6.

Then press CPT > PV. We get:

FV = 418.74

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Data Science in Finance: 9-Book Bundle

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Master R and Python for financial data science with our comprehensive bundle of 9 ebooks.

What's Included:

  • Getting Started with R
  • R Programming for Data Science
  • Data Visualization with R
  • Financial Time Series Analysis with R
  • Quantitative Trading Strategies with R
  • Derivatives with R
  • Credit Risk Modelling With R
  • Python for Data Science
  • Machine Learning in Finance using Python

Each book comes with PDFs, detailed explanations, step-by-step instructions, data files, and complete downloadable R code for all examples.