# Find past value of money? Isn't actually just like finding future value of money

• Jan 5th 2011, 07:35 AM
dexteronline
Find past value of money? Isn't actually just like finding future value of money
Say if we were to find the past value of $1 at an interest rate of 5% for the 10 years past today. If we were to use the present value formula$\displaystyle PV = \frac{FV}{(1+i)^n}$where$\displaystyle FV=1\displaystyle i=0.05\displaystyle n=-10\displaystyle PV = \frac{1}{(1+0.05)^{-10}}\displaystyle PV = \frac{1}{(1.05)^{-10}}\displaystyle PV = (1.05)^{10}\displaystyle PV = 1.62889462677744140625$It seems like the past value of$1 is kind of like future value of $1(Thinking) Does this make sense? To me it kind of does, since a dollar in hand today is worth less than a dollar we had 10 years ago Would someone here comment on these findings • Jan 5th 2011, 08:09 AM alexmahone Quote: Originally Posted by dexteronline Say if we were to find the past value of$1 at an interest rate of 5% for the 10 years past today.

If we were to use the present value formula

$\displaystyle PV = \frac{FV}{(1+i)^n}$

where
$\displaystyle FV=1$
$\displaystyle i=0.05$
$\displaystyle n=-10$

$\displaystyle PV = \frac{1}{(1+0.05)^{-10}}$
$\displaystyle PV = \frac{1}{(1.05)^{-10}}$
$\displaystyle PV = (1.05)^{10}$
$\displaystyle PV = 1.62889462677744140625$

It seems like the past value of $1 is kind of like future value of$1(Thinking)

Does this make sense?

To me it kind of does, since a dollar in hand today is worth less than a dollar we had 10 years ago

Would someone here comment on these findings

n=10, not -10.
• Jan 5th 2011, 05:38 PM
dexteronline
Quote:

Originally Posted by alexmahone
n=10, not -10.

My attempt was to find past value of money thus I used -10 for the 10th year in past from today. If I were to use 10 that will give us the present value of money for the 10th year in the future.

If I am attempting it wrong, may you suggest how we would go about finding PAST value of money.
• Jan 5th 2011, 05:44 PM
alexmahone
Quote:

Originally Posted by dexteronline
If I were to use 10 that will give us the present value of money for the 10th year in the future.

Let PV be the value 10 years back. Then FV is the future value of money relative to 10 years back; so it is the present value.
• Jan 5th 2011, 06:01 PM
dexteronline
Quote:

Originally Posted by alexmahone
Let PV be the value 10 years back. Then FV is the future value of money relative to 10 years back; so it is the present value.

a) What was $1 worth on Jan 5, 2001 if interest rate is 5% b) What will be the value of$1 on Jan 5, 2021 if interest rate is 5%
a) What was $1 worth on Jan 5, 2001 if interest rate is 5% b) What will be the value of$1 on Jan 5, 2021 if interest rate is 5%