Gabriella OK, first, let's write down the equation used to calculate a future value (FV). The Calculation of a Future Value Next, let's rearrange the equation to isolate the present value (PV) term by dividing both sides of the equation by the . Then, we'll simply rewrite the equation to put the unknown variable, the PV term, on the left-hand side of the equation: FV = PV x (1 + I)N FV X = PV (1 + I)N PV = FV X 1 (1 + I)N So, does this make sense? We've rearranged the future value equation to solve for the present value. Also, notice that the present value interest factor is the of the future value interest factor. This means that you don't necessarily need two different interest factor tables for the single cash flow; you can make do using either simply the present value table or the future value table-so long as you use it correctly. Dakota So, do you think that we're ready to do a problem? Gabriella Sure! Here's one from our homework. You work and I'll work, and we'll see if our answers match. Dakota OK. Let's get started. Homework Problem Sarah wants to reduce the cost of graduate school by starting a savings plan today. As a sophomore, she has estimated that she has three years to accumulate the $22,500 that she needs to help cover some of her projected expenses. The account she would open would earn 8% per year compounded annually. So how much would she have to deposit today to accumulate $22,500 in three years? Or, stated differently, what is the value of $22,500? (Note: Round your answer to the nearest whole dollar.) so that she would have the desired $22,500 I think that Sarah would have to deposit at the end of three years. Is that what you got when you solved the problem? Gabriella Yes it is! I think we've got a good start on getting ready for Dr. Anderson's next quiz