Present Value of a Single Sum of Money

By the single sum of money, we mean the future value which is discounted using the discount rate/ interest rate to calculate the present value (PV). In other words, we can say that 

Future value = PV + Compound interest

Formula

P = S / ( i + i )^n

Where:

P = Present value

S = Future value

i = discount rate / interest rate

n = number of compounding periods

Question

What is the PV of $ 75,000 to be paid in 04 years discounted at 10 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} compounded annually.

Answer

Here:

S = 75,000

n = 4

i = 0.10

Now, we will plug above values in Present value formula given above:

PV = 75,000 / (1.10)^4

PV = $ 51,226