T+ "ES
EXPLANATION OF TABLE 25
THE PRESENT VALUE OF ONE DorrAarR DUE AT A FUTURE DATE
The present value of $1 due at some future time is the sum
which placed at compound interest will amount to $1 at that
time.
The formula on which Table 25 is based is as follows:
Let P represent the present value of $1 due at the end
of n years.
Let n represent any number of years.
Let 7 represent the interest rate expressed decimally as 0.05
for 5 per cent.
I
Then P = (x +3)" (20)
Table 235 has been prepared for only a few selected years because
the present value of $1 due at a future time is also readily obtainable
 from Table 22. According to equation (19), A’ may be
substituted for (1 + ¢)”, equation (20) may then be written:
I
P= VL (21)
That is to say, the present value of $1 due at any future time is
the reciprocal of $1 at compound interest for the same time.
Example. — What is the present value of $600 due in 8 years
at 4 per cent interest?
From Table 22 the amount of $1 at 4 per cent compound
interest in 8 years is $1.368569, consequently the present value
of $1 due in 8 years will be
I + 1.368560 = 0.730690
and the present value of $600 due in 8 years at 4 per cent will be
0.730690 X 600 = $438.41.
Note. — To find the present value of $1 due at the end of
any number of years # not noted in this table, select two or

. ABIL.
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