Use the following two columns of items to answer the matching questions below:
-present value interest factor
A)the process of obtaining present values
B)a factor multiplied by a future value to get the present value of that amount

Question

Quizplus · Accepted Answer

The PVIF is used in the process of discounting, which is option A) the process of obtaining present values. When you want to determine the present value of a future amount of money, you multiply that future amount by the present value interest factor. The PVIF takes into account the time value of money, which is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity.
To calculate the PVIF, you need to know the discount rate (or interest rate) and the number of periods over which the money will be invested or borrowed. The formula for the PVIF is:
PVIF = 1 / (1 + r)^n
Where:
- r is the discount rate (or interest rate) per period
- n is the number of periods
Using the PVIF, you can determine the present value (PV) of a future sum of money (FV) by using the formula:
PV = FV * PVIF
This calculation helps in comparing the value of money received or paid at different times, making it a fundamental concept in finance for activities such as investment analysis, capital budgeting, and loan amortization.

Use the Following Two Columns of Items to Answer the Matching