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


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question 1 of 3

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

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


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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About This Quiz & Worksheet

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

The quiz will help you practice these skills:

  • 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

Additional Learning

After you are done with the quiz, peruse the partner lesson How to Calculate Present Value of an Investment: Formula & Examples. This accompanying lesson covers these objectives:

  • Defining present value
  • Using the present value formula
  • Identifying the components of the present value formula
  • Exploring the caveats of the present value formula