The calculation formula of future value and present value is present value (PV) = principal (P) × 1/(1+r)^n future value (FV) = principal (P) × ( 1+r)^n where r represents the annual interest rate and n represents the investment period.

1. Future Value calculation formula

FV = P * (1 + r)^n where P represents the principal (current investment amount) and r represents The annual interest rate (or monthly interest rate, and so on), n represents the investment period (in years or months, and so on). This formula can be used to calculate the total amount of funds at some point in the future.

2. Present Value calculation formula

PV = FV / (1 + r)^n where FV represents the total amount of funds expected to be obtained in the future, and r represents the annual interest rate (or monthly interest rate, and so on), n represents the investment period (years or months, and so on). This formula can be used to calculate how much money needs to be invested now to obtain the expected returns in the future.

3. Scope of application of future value and present value calculations

These formulas are not only used in investment decisions in the financial field, but also in other fields, such as insurance, leasing and real estate. field. For example, in insurance, these formulas can be used to calculate the value of insurance in the future or the value of insurance today.

The importance of future value and present value in economics and finance

1. Importance in economics

In economics, future value The concept of present value is very important. They can help us better understand future economic conditions and they can help us better evaluate the costs and benefits of different investment options. For example, when formulating economic policies, the government can use the concepts of future value and present value to evaluate the future impact of different policy options in order to make more informed decisions.

2. Importance in finance

In finance, the concepts of future value and present value are even more crucial. These concepts are key factors in evaluating investment value and risk. one. Investors can determine the investment value and risk of a stock by calculating its future value and present value.

Or determine the investment value and risk of a bond by calculating the future value and present value of the bond. These concepts are also widely used in the financial derivatives market, such as options, futures, etc.