Practice Quiz

Financial Planner

Category - General Principles of Financial Planning

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Which of the following is the calculation you should use to determine the present value of a lump sum?
  1. [(Future value)/(i+1)n]
  2. (Present value)*(i+1)n
  3. [(Future value)/(i n +1)]
  4. (Present value)*(i n +1)
Explanation
Answer: A - When figuring the time value of money, you should either convert present values to future values or estimate the future value of a known present value. The present value is the current worth of an asset. To figure out the present value, use the equation [(Future value)/(i+1)n], where i is the interest rate and n is the number of time periods.
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