# How to Calculate Present Value of an Investment: Formula & Examples

Instructions:

question 1 of 3

### In the present value formula PV = X / ((1+r)^n), what does n represent?

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### 2. Jane recently inherited \$300,000, and she wants to invest a portion of it so that she will have \$500,000 saved by the time she retires in 20 years. However, she is unsure how much interest she can earn annually on her investment. If she earns 3% compound interest annually, how much more would she have to save today than if she earned 5% annually? Round the answer to the nearest dollar.

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The quiz is a series of questions about definitions related to present value and investments. The questions will ask you what a particular term in the present value formula represents. There is also a true or false question.

## Quiz & Worksheet Goals

The quiz will test you on the following:

• Investments
• Present value
• What 'X' represents in the present value formula

## Skills Practiced

• Making connections - use understanding of the concept of present value
• Interpreting information - verify that you can read information regarding investments
• Defining key concepts - ensure that you can accurately define main phrases, such as present values