{"appState":{"pageLoadApiCallsStatus":true},"articleState":{"article":{"headers":{"creationTime":"2017-01-29T18:52:21+00:00","modifiedTime":"2017-01-29T18:52:21+00:00","timestamp":"2022-09-14T18:17:10+00:00"},"data":{"breadcrumbs":[{"name":"Academics & The Arts","_links":{"self":"https://dummies-api.dummies.com/v2/categories/33662"},"slug":"academics-the-arts","categoryId":33662},{"name":"Study Skills & Test Prep","_links":{"self":"https://dummies-api.dummies.com/v2/categories/33772"},"slug":"study-skills-test-prep","categoryId":33772},{"name":"SAT","_links":{"self":"https://dummies-api.dummies.com/v2/categories/33794"},"slug":"sat","categoryId":33794}],"title":"SAT Math Word Problems: Present and Future Values","strippedTitle":"sat math word problems: present and future values","slug":"sat-math-word-problems-present-future-values","canonicalUrl":"","seo":{"metaDescription":"You are almost guaranteed to encounter a word problem on the SAT Math exam that deals with banking; for example, you may be asked to determine the present value","noIndex":0,"noFollow":0},"content":"You are almost guaranteed to encounter a word problem on the SAT Math exam that deals with banking; for example, you may be asked to determine the present value of an account based on its future value, or vice versa.\r\n\r\nThe following practice questions require you to build equations to calculate the present value of a savings account.\r\n<h2 id=\"tab1\" >Practice questions</h2>\r\n<ol>\r\n\t<li>The money in a savings account increases 0.6% each month. Which of the following equations shows the present value, <em>PV</em>, of the money in the account based on the future value, <em>FV</em>, after a period of <em>m</em> months?\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2601.gif\"><img class=\"alignnone size-medium wp-image-232827\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2601-128x255.gif\" alt=\"SAT1001_eq2601\" width=\"128\" height=\"255\" /></a></li>\r\n\t<li>The money in a savings account increases by an annual interest rate of <em>i</em> percent. If the interest accrues monthly, which of the following equations shows the present value, <em>PV</em>, of the money in the account based on the future value, <em>FV</em>, after a period of <em>m</em> months?\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2602.gif\"><img class=\"alignnone size-full wp-image-232828\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2602.gif\" alt=\"SAT1001_eq2602\" width=\"176\" height=\"232\" /></a></li>\r\n</ol>\r\n<h2 id=\"tab2\" >Answers and explanations</h2>\r\n<ol>\r\n\t<li><strong>The correct answer is Choice (B).</strong>\r\nEach month, the present value, <em>PV</em>, increases 0.6%, meaning that it's multiplied by 1.006 (because 100% + 0.6% = 100.6%). In the equation, <em>m</em> represents the number of times that the present value is multiplied by 1.006. This gives you the following equation:\r\n<em>FV</em> = <em>PV</em>(1.006)<em><sup>m</sup></em>\r\nDivide both sides by (1.006)<em><sup>m</sup></em> to get the value of <em>PV</em>.</li>\r\n\t<li><strong>The correct answer is Choice (D).</strong>\r\nIf the annual interest rate is <em>i</em> percent, then it's <em>i</em>/100. Divide this by 12 for a monthly interest rate of <em>i</em>/1,200.\r\nEach month, the present value, <em>PV</em>, increases by<em> i</em>/1,200, meaning that it's multiplied by\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2603.gif\"><img class=\"alignnone size-full wp-image-232829\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2603.gif\" alt=\"SAT1001_eq2603\" width=\"71\" height=\"48\" /></a>\r\nIn the equation, <em>m</em> represents the number of times that the present value is multiplied by\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2604.gif\"><img class=\"alignnone size-full wp-image-232830\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2604.gif\" alt=\"SAT1001_eq2604\" width=\"71\" height=\"48\" /></a></li>\r\n</ol>","description":"You are almost guaranteed to encounter a word problem on the SAT Math exam that deals with banking; for example, you may be asked to determine the present value of an account based on its future value, or vice versa.\r\n\r\nThe following practice questions require you to build equations to calculate the present value of a savings account.\r\n<h2 id=\"tab1\" >Practice questions</h2>\r\n<ol>\r\n\t<li>The money in a savings account increases 0.6% each month. Which of the following equations shows the present value, <em>PV</em>, of the money in the account based on the future value, <em>FV</em>, after a period of <em>m</em> months?\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2601.gif\"><img class=\"alignnone size-medium wp-image-232827\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2601-128x255.gif\" alt=\"SAT1001_eq2601\" width=\"128\" height=\"255\" /></a></li>\r\n\t<li>The money in a savings account increases by an annual interest rate of <em>i</em> percent. If the interest accrues monthly, which of the following equations shows the present value, <em>PV</em>, of the money in the account based on the future value, <em>FV</em>, after a period of <em>m</em> months?\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2602.gif\"><img class=\"alignnone size-full wp-image-232828\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2602.gif\" alt=\"SAT1001_eq2602\" width=\"176\" height=\"232\" /></a></li>\r\n</ol>\r\n<h2 id=\"tab2\" >Answers and explanations</h2>\r\n<ol>\r\n\t<li><strong>The correct answer is Choice (B).</strong>\r\nEach month, the present value, <em>PV</em>, increases 0.6%, meaning that it's multiplied by 1.006 (because 100% + 0.6% = 100.6%). In the equation, <em>m</em> represents the number of times that the present value is multiplied by 1.006. This gives you the following equation:\r\n<em>FV</em> = <em>PV</em>(1.006)<em><sup>m</sup></em>\r\nDivide both sides by (1.006)<em><sup>m</sup></em> to get the value of <em>PV</em>.</li>\r\n\t<li><strong>The correct answer is Choice (D).</strong>\r\nIf the annual interest rate is <em>i</em> percent, then it's <em>i</em>/100. Divide this by 12 for a monthly interest rate of <em>i</em>/1,200.\r\nEach month, the present value, <em>PV</em>, increases by<em> i</em>/1,200, meaning that it's multiplied by\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2603.gif\"><img class=\"alignnone size-full wp-image-232829\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2603.gif\" alt=\"SAT1001_eq2603\" width=\"71\" height=\"48\" /></a>\r\nIn the equation, <em>m</em> represents the number of times that the present value is multiplied by\r\n<a href=\"https://www.dummies.com/wp-content/uploads/SAT1001_2604.gif\"><img class=\"alignnone size-full wp-image-232830\" src=\"https://www.dummies.com/wp-content/uploads/SAT1001_2604.gif\" alt=\"SAT1001_eq2604\" width=\"71\" height=\"48\" /></a></li>\r\n</ol>","blurb":"","authors":[{"authorId":8978,"name":"Ron Woldoff","slug":"ron-woldoff","description":" <p><b>Ron Woldoff is founder of National Test Prep, where he helps students succeed on the GMAT, GRE, SAT, ACT, and PSAT. 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SAT Math Word Problems: Present and Future Values

By: Ron Woldoff and

Updated: 01-29-2017

From The Book: SAT

SAT

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You are almost guaranteed to encounter a word problem on the SAT Math exam that deals with banking; for example, you may be asked to determine the present value of an account based on its future value, or vice versa.

The following practice questions require you to build equations to calculate the present value of a savings account.

Practice questions

The money in a savings account increases 0.6% each month. Which of the following equations shows the present value, PV, of the money in the account based on the future value, FV, after a period of m months?
The money in a savings account increases by an annual interest rate of i percent. If the interest accrues monthly, which of the following equations shows the present value, PV, of the money in the account based on the future value, FV, after a period of m months?

Answers and explanations

The correct answer is Choice (B). Each month, the present value, PV, increases 0.6%, meaning that it's multiplied by 1.006 (because 100% + 0.6% = 100.6%). In the equation, m represents the number of times that the present value is multiplied by 1.006. This gives you the following equation: FV = PV(1.006)^m Divide both sides by (1.006)^m to get the value of PV.
The correct answer is Choice (D). If the annual interest rate is i percent, then it's i/100. Divide this by 12 for a monthly interest rate of i/1,200. Each month, the present value, PV, increases by i/1,200, meaning that it's multiplied by
In the equation, m represents the number of times that the present value is multiplied by

About This Article

This article is from the book:

SAT ,

About the book author:

Ron Woldoff is the founder of National Test Prep, where he helps students prepare for the SAT, GMAT, and GRE. He is the author of several books, including GRE For Dummies and 1,001 GRE Practice Questions For Dummies.

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SAT ,