Topic for Discussion: “Present Value and Discounting?”
Few days ago, the State Bank of Pakistan (SBP) has raised interest rate up to 9.5 percent from 9.0 percent, in line with requirements set by the International Monetary Fund. This increase was in a need to curtail rising inflation by tightening the flow of liquidity through higher interest rate. You were planning to purchase an insurance policy. What will be the effect of this rise in interest rate on:
a) Present value of insurance policy
b) Future value of insurance policy
Every thing is right but what is the final answer.
pata nae . koe asay bol raha to koe , pv ko up kar rahai or FV ko less :(
ya to first jo is site k Admin nay solution dia hai is k hisab say theak hai or book k hisab say b ,but policy ko as lon lay k or persent mn pofit lay rahe hn k g, agar ap ka loss aj ho jaye to ap ko aj ki date mn he fix ki gaye amount of profit mil jaye to to is ka kea ho ga ?? or is ka ans to asy hai :( As the interest rate will increase
present value of insurance policy will also increase.
future value of insurance policy will Decrease
mara bano ta paravo
koyae full and final daso g.
time is tight.
AP ny to aur b complex kr di situation
Before we going to answer of gdb 1st understand the Present Value Versus Future Value in world of finance. Present value is a fundamental concept in the world of finance. It refers to the current worth of a future stream of cash flows or amount of money at a given rate of return. Future value is the dollar amount that the investor will receive in the future. Analysts arrive at present value through the discounting process -- discounting future value. The concept helps you make financial decisions, especially when you are considering expected future returns.
The formula to figure out present value is: Present Value = Future Value/(1+Interest rate). Example: If you want to make $800 in one year and the interest rate is 5% or .05, present value = $800/1.05). The amount you invest today would have to be $761.90.
Future value is the compounding of interest earned on the present value, or starting amount. Subtract the present value from the future value: Amount of Interest = FV - PV.
When the interest rate increase present value of the policy will be decreased and future value of the policy will be increased.
Mathmetical formuly k alwa koe reason?