Practice Present and Future Value in Math
Use these practice problems to test your method after reviewing the concept explanation and worked examples.
Quick Recap
The concept that money has different values at different points in time. Future value (FV) calculates what a present amount will grow to; present value (PV) calculates what a future amount is worth today, using discounting.
Would you rather have \100 today or \100 in five years? Today, obviously—because you could invest the \100 and have MORE than \100 in five years. Present value answers: 'How much would I need TODAY to have \X in the future?' Future value answers: 'If I invest \X today, what will it become?' Discounting is the reverse of compounding—it shrinks future money back to today's value.
Example 1
easyFind the future value of \5{,}000 invested at 4\% annual interest compounded annually for 6$ years.
Example 2
mediumHow much should you invest today at 5\% annual interest compounded quarterly to have \20{,}000 in 8$ years?
Example 3
mediumAn investment doubles in 9 years with annual compounding. What is the approximate annual interest rate?
Example 4
hardCompare the future values of \10{,}000 invested for 20 years at 6\%$ with (a) annual compounding, (b) monthly compounding, and (c) continuous compounding.