Melanie will receive a graduation gift of $7,000 from her parents in 4 years. If the discount rate is 3%, what is the gift worth today? Answer: $6,219.41 USE PV Function What is the Excel input?
Solution
Pv= Future value/(1+ Discount Rate)^no.of years 7000/(1.03)^4= 6219.41 Year 0 1 2 3 4 Periodic Rate 0 3% 3% 3% 3% Future Vaue 7000 Present Value -6,219.41 Guide to use the PV function in Excel 1. Select \"Formula\" 2. Go to PV function under Financial function key 3.Give the following values for the rows in the PV Function Rate - 3% (Discount Rate) Nper -4 - (No.of periodic payments) Pmt - 0-(Payment made each period) FV- 7000 (Future value of the gift) Type -0 for the end & 1 for the beginning of the period payment If 0 it is not entered. Finally if OK is selected, PV appears as a negative value(red lettered) as the result in the box &at the place of the cursor It is negative because it is an outflow
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Melanie will receive a graduation gift of $7-000 from her parents in 4.docx
1. Melanie will receive a graduation gift of $7,000 from her parents in 4 years. If the discount rate
is 3%, what is the gift worth today? Answer: $6,219.41 USE PV Function What is the Excel
input?
Solution
Pv= Future value/(1+ Discount Rate)^no.of years 7000/(1.03)^4= 6219.41 Year 0 1 2 3 4
Periodic Rate 0 3% 3% 3% 3% Future Vaue 7000 Present Value -6,219.41 Guide to use the PV
function in Excel 1. Select "Formula" 2. Go to PV function under Financial function key 3.Give
the following values for the rows in the PV Function Rate - 3% (Discount Rate) Nper -4 - (No.of
periodic payments) Pmt - 0-(Payment made each period) FV- 7000 (Future value of the gift)
Type -0 for the end & 1 for the beginning of the period payment If 0 it is not entered. Finally if
OK is selected, PV appears as a negative value(red lettered) as the result in the box &at the place
of the cursor It is negative because it is an outflow
