Calculate the present value (principal) and the compound interest (in $). Use Table 11-2. Round your answers to the nearest cent Compound Term of Amount Nominal Investment Rate (%) $400,000 10 years Interest Compounded annually Present Value $952.40 Compound Interest

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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.