# Can someone check my math (PV question)

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I am trying to calculate the present day dollars of \$84,000 at 5% interest rate.

Excel inputs: =PV(0.05,25,0,84000,0)

Answer: -\$24,805

In previous readings I believe the way to look at the negative is that it's the amount of the payment I have to pay out but it always throws me off.

If anyone could confirm this is the present day dollar value that would be great!

Thanks!

## Answers

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Your calculation is correct. The result means that you would have to put \$24,805 on the table today, wait for 25 years, and come back to collect \$84,000. The result is negative because you have to pay less than the full amount. Put differently, \$84000 +(-24805) = [expected interest].

Prove your calculation like this. Make the following entries in a blank worksheet.

``[C1] =24805``
``[A2] =A1+1``
``[B2] =C1``
``[C2] =B2*1.05``

Copy A2:C2 down to row 26. In column C you will see how your initial investment increases by 5% each year until it reached \$83,998.53 after 25 years (column A). I presume that MSÂ won't make good your shortfall of \$1.47. Instead, they are likely to be able to explain how this has to do with the difference between 365.25 actual days in a year and 365 days presumed by their formula. (Not good enough for me, lol: But who wants to argue with MS?)