Help with PV calculations

[PJF]

I have an application that makes a single payment 2 years after the signing
of a contract. I need to calculate the PV of that payment asof the date the
contract is signed based on the discount rate that includes the two years
during which no payments were made.

Example:

Contract signed 1/1/2005
no payments due 2005 or 2006
principal due in full 1/1/2007
discount rate 5%

Question: how do I calculate the discounted value of the principal from
1/1/2005 until principal payment due date on 1/1/2007, considering there are
no payments due either in 2005 or 2006? I know what the PV is but can't get
to it in Excel.

Any suggestions would be appreciated.

PJF

 

[Guest]

I'm not sure why you'd use PV (instead of just division), but if you must...
with A3 being the amount of the final payment: =PV(5%,2,0,-A3)
Logic: Two periods, with interest at 5% per period, and no payments made in
the interim. The minus sign is because the final payment flows in the
opposite direction as the initial payment (you write the check when the
contract is signed and receive a check two years hence).
--Bruce

 

[PJF]

Thanks, Bruce. Appreciate your help.

Pete

I'm not sure why you'd use PV (instead of just division), but if you must...
with A3 being the amount of the final payment: =PV(5%,2,0,-A3)
Logic: Two periods, with interest at 5% per period, and no payments made in
the interim. The minus sign is because the final payment flows in the
opposite direction as the initial payment (you write the check when the
contract is signed and receive a check two years hence).
--Bruce