When calculating interest, we should consider the existence of inflation. Under the condition of inflation, the future value of 1 yuan and the present value of 1 yuan are not equal, that is to say, the future value of 1 yuan is not as valuable as the present value of 1 yuan, which leads to the concepts of final value and present value.
The so-called present value refers to the present value of money.
The so-called final value refers to the value of money at a certain moment in the future.
From the concepts of present value and final value, we know that the same amount cannot be equal at different time points, nor can it be added or subtracted directly. Only by converting them into quantities at the same time point can they be calculated.
For example, Zhang Hua's monthly income is 300 yuan at 1990 and 3000 yuan at 20 10. At this time, these two numbers cannot be added, subtracted or compared directly. You can't say that your monthly income is ten times that of the past, nor can you say that Zhang Hua's monthly income has increased by 2700 yuan, let alone that your average monthly income from 1990 to 20 10 is 1650 yuan.
Because it is meaningless to compare such figures in different historical periods. In general, it is compared by converting it into present value, that is, comparing present value.
In the process of interest calculation, the common calculation formulas of present value and final value are as follows.
The formula for calculating the present value of simple interest is: P=S/( 1+i×n).
The formula for calculating the present value of compound interest is: p = s/(1+I) n.
The formula for calculating the final value of simple interest is: S=P×( 1+i×n).
The formula for calculating the final value of compound interest is: s = p× (1+I) n.
Where p stands for present value; S represents the final value; I stands for interest rate; N stands for duration.
For example, Wang Ping deposited 500,000 yuan in the bank, which will be used as the expenses for his children to study abroad for 20 years. If the average bank deposit interest rate is 5% in the next 20 years, how much will this fund become after 20 years?
In fact, what we are looking for now is the final value of 500,000 deposits in 20 years. According to the calculation formula, we can get: s = 50× (1+5%) 20 = 50× 2.653 =1326500 yuan.
For another example, Wang Ping has prepared a 20-year study abroad fund of 6.5438+0 million yuan for his children. If the average deposit rate of the bank in these 20 years was 5%, how much money would he save now?
The topic is about how much money is deposited in the bank now, and after 20 years, you can get the principal and interest of 654.38+0 million yuan. That is, what is the present value of 6,543,800 yuan after 20 years. According to the calculation formula:
P =100/(1+5%) 20 =100/2.653 = 376,900 yuan.
Present value and final value are the corresponding values of a certain amount of funds at two different time points before and after, and the difference is the time value of funds.