Present Value 3

[andrew1996128]

u have helped me a lot

[MrPEDOCTOR]

i dont see any real advantage of finding the PV over the final value?

[WilliamNaville]

btw the equation is a little cricked cause 20+50+35=105

[WilliamNaville]

lol you should add inflation in there before everybody is running to the federal reserver :P

[iULorraine770]

hookup now bit.ly\n16lux

[haseebahmed07518]

man i wish we have teachers lyk u in our school :)

[zahra225512]

hey sal you just said in the beginning that this was "compounding" forward and "discounting" backwards. But when we calculated year3 values in the previous video we used the formula =PV(1+2r)=100(1.1)=110 which is the normal payment two years after with "UNcompounded" interest rate. Had it been compounded then we would use the formula =PV(1+r)^2=100(1.05)^2=110.25 which gives adifferent answer. So why do you call this "compounding" in this case?

[zahra225512]

Hey sal, you said that this is "compounding" forward and "discounting backwards, but the way we calculated the year3 values in the previous video was by the formula: PV(1+2r)=100(1.1)=110 which is the normal way of finding the uncompounded future payment with annual interest. However if it had been compounded then it would be =100(1.05)^2=110.25. So why do you call the first choice future payments as compounded?

[thegoonist]

can someone tell me why cant we work in forward terms? i find myself subconsciously calculating the interest rates forwards instead of backwards and finding the PV.

i mean, essentially both achieve the same aims of finding which option is the best so i dont see any real advantage of finding the PV over the final value? unless there are other reasons that sal hasnt explained?

[cunui2]

if a person does say he will give you $100 now or $110 in year. How will you find the present value? Will it depend on inflation and/or prices of goods to income ration?

[santyias87]

@cunui2 its based on the discount rates that the federal reserve maintains and controls

[autorancho]

god bless you !!! thanks

[PhilipK100]

Sal, I've learned more from your videos than I ever did in my five years of Business studies in College - Thanks

Philip (Northern Ireland/U.K)

[ionuorah]

@PhilipK100 % 5 years? where your sleeping during lectures or what?

[kittykattykoo]

wow, you're my hero Sal!

[LostinArnhem]

I give this a A+. A perfect teacher!