FINDING THE PRESENT VALUE FOR N NOT AN INTEGER

INTRODUCTION:

Present Value is the original value which will accumulate to a certain amount.

*FORMULA:

Or = (1 + )
=
(1 + )

Where: P = Present Value

F = Compound Amount

i = Periodic Rate ( )

n = number of conversion periods for the whole term ()

m = number of conversion periods

t = time or term of investment which is expressed in years

This time, the total number of conversion periods (n) is not an integer.

PROBLEM:

1.) Find the present value of 5000 due at the end of 2 years and 8 months, if money is
worth 9% compounded semi-annually?

Solution:

Let F = 5000

r = 9%

m=2
 t = 2 years and 8 months

.09
= = 0.045
2

8 1
= = 2 (2 12) = 5 3

= (1 + )
1
= 5000(1 + .045)5 3
1
= 5000(1.045)5 3

= 5000(0.790763201)

= 3953.82

2.) Discount 2400 for 3 years and 7 months if money is 7% compounded quarterly.

Solution:

Let F = 2400

r = 7%

m=4

t = 3 years and 5 months

7 1
= = 4 (3 12) = 14 3

= (1 + )
1
= 2400(1 + .0175)14 3
1
= 2400(1.0175)14 3

= 2400(0.1798420997)

= 1871.62
3.) Find the present value of P20000 for 1 year and 1 month at 3 % compounded

a. annually

b. bi-monthly

c. quarterly

Solution:

. Let F = 20000 1 1
= = 1 (1 ) = 1
12 12

r = 3%
= (1 + )
m=1 1
= 20000(1 + .03)1 12
t = 1 year and 1 month
1
.03
= 20000(1.03)1 1 2
= = = 0.03
1
= 19,369.70
b.

Let F = 20000 1 1
= = 6 (1 ) = 6
12 2
r = 3% = (1 + )
m=6 1
= 20000(1 + .005)6 2
t = 1 year and 1 month
1
.03
= 20000(1.005)6 2
= = = 0.005
6
= 19,362.02
c.Let

F = 20000 1 1
= = 4 (1 ) = 4
12 3
r = 3%
= (1 + )
m=4 1
= 20000(1 + .0075)4 3
t = 1 year and 1 month
1
.03
= 20000(1.0075)4 3
= = = 0.0075
4
= 19,362.80
ACTIVITIES:

1. Find the present value of a loan 70,000 at 7% compounded quarterly that due in 7
years and 2 months.

2. Discount the amount 5,500 for 5 years and 5 months at 5% converted annually.

3. Mang Isidro buys house and lot. The lessor will collect his payment in every 6 months
a year and after 5 years and 3 months the total collection of the lessor will be
P5000000. Find the present value with 8% compounded semi-annually.

4. Mrs. Villanueva invested a certain amount of money in the bank. She assumed that
the money will become 35,000 after 3 years and 3 months and that money serves as
the capital of her new business. Find the present value with 10% compounded annually.

5. Find the present value of 5000 for 5 years and 5 months at 5% compounded:

a. semi-annually

b. quarterly

c. annually
Solution:

1. . Let 2 2
= = 4 (7 12) = 28 3
F = 70,000
= (1 + )
r = 7% 2
= 70000(1 + .0175)28 3
m=4
2
= 70000(1.0175)28 3
t = 7 years and 2 months
= 42, 570.76
.07
= = = 0.0175
4

2. . Let

F = 5500 5 5
= = 1 (5 12) = 5 12
r = 5% = (1 + )
m=1 5
= 5500(1 + .05)5 12
t = 5 years and 5 months
5
.05
= 5500(1.05)5 1 2
= = = 0.05
1
= 4,222.67
3.

Let F = 5,000,000 3 1
= = 2 (5 12) = 10 2
r = 8%
= (1 + )
m=2 1
= 5000000(1 + .04)10 2
t = 5 years and 3 months
1
.08
= 5000000(1.04)10 2
= = = 0.04
2
= 3,312,335.85
4.

Let F = 35,000 3 1
= = 1 (3 12) = 3 4
r = 10%
= (1 + )
m=1 1
= 35000(1 + .10)3 4
t = 3 years and 3 months
1
.10
= 35000(1.10)3 4
= = = 0.10
1
= 25,676.85
5.

a. Let F = 5,000 5 5
= = 2 (5 12) = 10 6
r = 5% = (1 + )
m=2 5
= 5000(1 + .025)10 6
t = 5 years and 5 months
5
.05
= 5000(1.025)10 6
= = = 0.025
2
= 3,826.44
b. Let

F = 5,000 5 2
= = 4 (5 12) = 21 3
r = 5%
= (1 + )
m=4 2
= 5000(1 + .0125)21 3
t = 5 years and 5 months
2
.05
= 5000(1.0125)21 3
= = = 0.0125
4
= 3,820.13
c. Let F = 5,000 5 5
= = 1 (5 12) = 5 12
r = 5%
= (1 + )
m=1 5
= 5000(1 + .05)512
t = 5 years and 5 months
5
.05
= 5000(1.05)5 12
= = = 0.05
1
= 3,838.79
Edlynne Cruz

Ken Seneca