### Problem

What is the present value of a lump sum of 30,000 received in 6 periods time when the discount rate is 4% per period?

### Solution

The amount of 30,000 (FV) is received at the end of period 6, and needs to be discounted back 6 periods (n) to the start of period 1, at a discount rate of 4% (i).

This problem is solved using the present value of a lump sum formula as follows.

FV = 30,000 n = 6 i = 4% PV = FV /(1 + i)^{n}PV = 30,000 /(1 + 4%)^{6}PV = 23,709.44

### Explanation

At a discount rate of 4%, receiving 30,000 in 6 periods time is equivalent to receiving 23,709.44 now.

### PV2 Present Value Examples

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Last modified January 29th, 2019