With an interest rate of 6.5% p.a, compounded monthly, (i) Calculate the equivalent value of all cash flow in year 15. (ii) Calculate the future value of all cash flows after 30 years by assuming that there are no more transactions after 15 years. (iii) Calculate the yearly amount to be deposited in 30 years to get the amount as calculated in (ii).

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.