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Business
Finance
Quarter 4 – Module 3
Calculating Future Value and
Present Value of Money
Introductory Message
For the facilitator:
Welcome to the Grade 12 Business Finance Alternative Delivery Mode (ADM) Module
on Calculating Future Value and Present Value of Money!
This module was collaboratively designed, developed and reviewed by educators both
from public and private institutions to assist you, the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.
This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.
In addition to the material in the main text, you will also see this box in the body
of the module:

As a facilitator, you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

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For the learner:
Welcome to the Grade 12 Business Finance Alternative Delivery Mode (ADM) Module
on Calculating Future Value and Present Value of Money!
This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.
This module has the following parts and corresponding icons:
This will give you an idea of the skills or
What I Need to Know competencies you are expected to learn in the
module.

This part includes an activity that aims to

check what you already know about the
What I Know
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

This is a brief drill or review to help you link

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In this portion, the new lesson will be

What’s New introduced to you in various ways; a story, a
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understand new concepts and skills.

This comprises activities for independent

practice to solidify your understanding and
What’s More
skills of the topic. You may check the answers
to the exercises using the Answer Key at the
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what you learned from the lesson.

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Assessment level of mastery in achieving the learning

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 competency.

In this portion, another activity will be given to

Additional Activities you to enrich your knowledge or skill of the
lesson learned.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.

If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you
are not alone.
We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

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 I

The module covers the mathematics of finance which focuses on the time value of money.
Future and present value computations are discussed using formulas and interest factor tables.

LEARNING COMPETENCY:
▪ Calculate future value and present value of money
(ABM_BF12_IIIg-h-18)

OBJECTIVES:
K: Define future value and time value of money

S: Solve future value and present value of money

A: Appreciate the application of future and present value of money in

business transactions.

Pre-assessment:
Directions: Identify what is asked in each item. Write the letter of the correct answer in your
notebook.
1. It is the concept that money you have now is worth more than the identical sum in the future due
to its potential earning capacity.
A. Value of money B. Time value of money
C. Future value of money D. All of these
2. What is the value of a current asset at a future date based on an assumed rate of growth?
A. Future value of money B. Present value of money
C. Time value of money D. None of these
3. From the formula of the future value 𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛, i represents .
A. Value B. rate
C. Period D. None of these

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4. What is the future value of ₱ 2,000 compounded at a 10% annual interest at the end of one year?
A. ₱ 2,000.00 B. ₱ 2,100.00
C. ₱ 2,200.00 D. ₱ 2,300.00
5. What is the present value of ₱1,000 received in two years if the interest rate is?
A. ₱ 797.16 B. ₱ 897.16
C. ₱ 997.16 D. ₱1,097.16

’s In

“A peso today is worth more than a peso tomorrow”. The time value of money would tell us
that a peso today is not equal to a peso in the future.
The most basic finance-related formula is the computation of interest. It is computed as
follows:

Simple Interest
Formula:
𝐼=𝑃𝑥𝑅𝑥𝑇
Where:
I = Interest
P = Principal
R = Interest rate
T = Time period in years

Task 1
Direction: Accomplish this in your notebook.

As a review, try the exercises below by identifying the:

a. Principal
b. Interest rate
c. and time period

1. Your father invested ₱ 20,000 in government securities that yields 5% annually for two years.
2. Jose obtained a car loan for ₱ 600,000 with an annual rate of 15% for 5 years.
3. Nina placed her graduation gifts amounting to ₱ 15,000 in a special savings account that provides
an interest of 2% for 5 months.
4. Your brother borrowed from your neighbor ₱ 10,000 to buy a new mobile phone. The neighbor
charged 10% for the borrowed amount payable after two years.

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5. You deposited ₱ 5,000 from the savings of your daily allowance in a time deposit account with
your savings bank at a rate of 14% per annum. This will mature in 6 months.

Compound Interest
Formula:
𝑟
𝐴 = 𝑃 (1 +
𝑛
Where:
A = final amount
P = Principal
r = Interest rate
n = number of times interest applied per time period
monthly; n = 12, quarterly; n = 4, semi-annually; n = 2
T = number of time period elapsed

’s New

Task 2
Congratulations!!! You have won a cash prize! You have two payment options:
A: Receive ₱100,000 now or
B: Receive ₱100,000 in three years.
Which option would you choose? Why?

is It

Time Value of Money

The time value of money (TVM) is the concept that money you have now is worth more than
the identical sum in the future due to its potential earning capacity. This core principle of finance
holds that provided money can earn interest, any amount of money is worth more the soonerit is
received. TVM is also sometimes referred to as present discounted value.

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Future Value of Money
Future value (FV) is the value of a current asset at a future date based on an assumed rate of
growth. The future value (FV) is important to investors and financial planners as they use it to estimate
how much an investment made today will be worth in the future. Knowing the future value enables
investors to make sound investment decisions based on their anticipated needs. However, external
economic factors, such as inflation, can adversely affect the future value of the asset by eroding its
value.
One peso put into a savings account today might be worth more than one peso a year after.
How does that work? The bank pays interest and your peso earns money for that year. Thus, a peso
deposited today has a higher future value, the same is true for investments.
Future value is an important calculation because it tells investors and individuals how much
an investment made today (present value) will be worth in the future.

Future Value of Money

Formula:
𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
or
𝐹𝑉 = 𝑃𝑉 (1 + 𝑖 )𝑛𝑡
Where:
PV = Present Value
i = interest
n = period
(1 + 𝑖)𝑛 = Future Value Interest Factor (FVIF)

Examples:

1. Find the future value of ₱ 1000 compounded at a 10% annual interest at the end of one year,
two years and five years.
Given:
PV = ₱ 1,000
i = 0.10
n = 1 year, 2 years, 5 years
Solutions:

A. Using the formula:

𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
at the end of one year:

𝐹𝑉 = 1,000 (1 + 0.10)1
𝐹𝑉 = ₱1,100
at the end of two years:
𝐹𝑉 = 1,000 (1 + 0.10)2
𝐹𝑉 = ₱1,210
at the end of 5 years:
𝐹𝑉 = 1,000 (1 + 0.10)5
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𝐹𝑉 = ₱1,610.51

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B. Using Future Value Interest Factor (FVIF) Table or (𝟏 + 𝒊)𝒏
In getting the value of (1 + 𝑖)𝑛, simply find the intersection of the relevant time period (n)
presented in the rows of the table and the relevant rate (i) presented in the columns of the table.

at the end of one year:

𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
𝐹𝑉 = 𝑃𝑉(1 + 0.10)1
𝐹𝑉 = 1,000 (1.1)
𝐹𝑉 = 1,100
at the end of two years:
𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
𝐹𝑉 = 𝑃𝑉(1 + 0.10)2
𝐹𝑉 = 1,000 (1.21)
𝐹𝑉 = 1,210
at the end of 5 years:
𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛
𝐹𝑉 = 𝑃𝑉(1 + 0.10)5
𝐹𝑉 = 1,000 (1.61051)
𝐹𝑉 = 1,610.51
2. Determine the compound amount on an investment at the end of 2 years if PV is ₱ 20,000 and is
deposited at 4% compounded:
a) semi-annually ; and
b) quarterly
Given:
PV = ₱ 20,000
i = 0.04/2
n=2x2=4
*n = 2 because it is compounded semi-annually
*n = 4 because it is compounded quarterly

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Solutions:
A. Using the formula:
𝐹𝑉 = 𝑃𝑉 (1 + 𝑖)𝑛𝑡
𝑛

Solutions:
2𝑥2
a. 𝐹𝑉 = 20,000 (1 + 0.04
2
)
𝐹𝑉 = 20,000 (1 + 0.02)4
𝐹𝑉 = ₱ 21,648.6

4𝑥2
b. 𝐹𝑉 = 20,000 (1 + 0.04
4
)
𝐹𝑉 = 20,000 (1 + 0.02)8
𝐹𝑉 = ₱ 21,657
B. Using Future Value Interest Factor (FVIF) Table or (𝟏 + 𝒊)𝒏

a) Given:
PV = ₱ 20,000
i = 0.04/2
n=2x2=4
Solution:
2𝑥2
𝐹𝑉 = 20,000 (1 + 0.04)
2
𝐹𝑉 = 20,000 (1 + 0.02)4 1.08243
𝐹𝑉 = 20,000 (1.08243)
𝐹𝑉 = ₱ 21,648.6
b) Given:
PV = ₱ 20,000
i = 0.04/2
n=4x2=8

Solution:
2𝑥4
𝐹𝑉 = 20,000 (1 + 0.04)
4
𝐹𝑉 = 20,000 (1 + 0.01)8 1. 08286
𝐹𝑉 = ₱ 21,657

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 Present Value of Money
Present value (PV) is the current value of a future sum of money or stream of cash flows
given a specified rate of return. Present value takes the future value and applies a discount rate or the
interest rate that could be earned if invested.

Receiving ₱1,000 today is worth more than ₱1,000 five years from now. Why? An investor
can invest the ₱1,000 today and presumably earn a rate of return over the next five years. Present
value takes into consideration any interest rates an investment might earn.

Formula:
𝑃𝑉 = 𝐹𝑉(1 + 𝑖)−𝑛
or
𝐹𝑉
𝑃𝑉 =

Where:
FV = Future value
1
(1+𝑖)𝑛
= Present Value Interest Factor (PVIF)

Examples:
1. Linda would like to buy a car two years from now using the proceeds of a 20% investment
that is compounded semi-annually. If the projected price of the car is ₱ 1,400,000, how much
money must be invested today to earn the price of the car?

a) Given:
FV = ₱ 1, 400,000
i = 0.20/2
n=2x2=4
Solutions:

A. Using the formula:

Solution:
𝐹𝑉
𝑃𝑉 =
(1 + 𝑖)𝑛

1,400,000
𝑃𝑉 = (2𝑥2)
(1+0.20
2
)
1,400,000
𝑃𝑉 =
(1 + 0.1)(4)
𝑃𝑉 = ₱ 956,200

B. Using Present Value Interest Factor (FVIF) Table or 1

(1+𝑖)𝑛
a) Given:
FV = ₱ 1, 400,000
i = 0.20/2
n=2x2=4
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 Solution:
𝐹𝑉
𝑃𝑉 =
(1 + 𝑖)𝑛

𝑃𝑉 = 1,400,000 𝑥 1
4
(1+ .20)
2
1
𝑃𝑉 = 1,400,000 𝑥
(1 + .10)4
1
𝑃𝑉 = 1,400,000 𝑥
(1 + .10)4
From the table below, the PVIF is 0.6830
𝑃𝑉 = 1,400,000 𝑥 0.6830

𝑃𝑉 = ₱ 956,200.00

’s More

Task 3
Direction: Copy the table below in your notebook and supply the correct answer in the
specified columns.
Find the future value and complete the table of the compound amount of ₱ 50,000.00
invested at 10% interest. Show your solutions. You can use the table found in the Appendix.

In 1 year In 5 years
1. Compounded annually
2. Compounded semi-annually
3. compounded quarterly
4. compounded monthly

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 I Have Learned

Now that we have finished our lesson, let us review the topics we have learned.

Direction: Provide what is being asked in each item. Write your answer in your notebook.

1. is the concept that money you have now is worth more than
the identical sum in the future due to its potential earning capacity.
2. is the value of a current asset at a future date based on an
assumed rate of growth.
3. What is the formula in computing the Present Value of money?

4. is the current value of a future sum of money or stream of cash

flows given a specified rate of return.
5. What is the formula in computing the Future Value of money?

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 I Can Do

Task 4
Direction: Answer the problem below in your notebook.

Your mother told you that she will entrust you with the funds for your post graduate studies.
She gave you two options:
a. Receive the money now in the amount of ₱ 200,000.00 or
b. Receive ₱ 500,000 ten years from now.
The available investment opportunities for you provide a 10% rate of return. Which option would you
prefer? (Hint: calculate future value of the 200,000 and compare it with expected cash flow of 500,000
ten years from now or compute the present value of the 500,000 and compare it to the 200,000 which
you can receive today.

RUBRICS for scoring.

OUTSTANDING (20pts)
Appropriateness: Fulfills or exceeds all of the assigned content requirements.
Accuracy: Knowledge of the subject is accurate throughout.
Extensiveness: Exhibits convincing range and quality of knowledge, having done
appropriate research, if applicable.
Perspective: The information presented reveals the understanding of the concept.
EFFECTIVE (15pts)
Appropriateness: Fulfills the important content requirements of the assignment.
Accuracy: Knowledge of the subject is accurate throughout except in minor details.
Extensiveness: Seems informed on the subject, having done appropriate research, if
applicable.
Perspective: The information presented reveals understanding of the concept
ADEQUATE (10 pts)
Appropriateness: Fulfills some of the important content requirements of the
assignment.
Accuracy: Knowledge of the subject is generally accurate, though flawed.
Extensiveness: Exhibits limited range or quality of knowledge, having done minimal
appropriate research, if applicable.
Perspective: The information presented reveals partial understanding of the concept.
INEFFECTIVE (5pts)
Appropriateness: Fails to address the important requirements of the assignment.
Accuracy: Knowledge of the subject is generally inaccurate.
Extensiveness: Knowledge of the subject lacks range or quality.
Perspective: The information presented reveals failure to understand the concept.

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I. Multiple Choice
Directions: Identify what is asked in each item. Write the letter of the correct answer in your
notebook.

1. What is the current value of a future sum of money or stream of cash flows given a specified rate
of return.
A. Future value B. Present value
C. Interest D. All of these
n
2. The interest value factor (1+i) can be used in calculating
A. Future value of money B. Present value of money
C. Either A or B D. Neither A nor B
3. The time value of money suggest that a peso received today is worth a peso
received in the future.
A. less than B. more than
C. the same as D. none of these
4. From the formula of the future value 𝐹𝑉 = 𝑃𝑉(1 + 𝑖)𝑛, n represents .
A. Value B. rate
C. Period/time D. None of these
5. What is your analysis of the given statements below?
Statement 1: Future value of money is the concept that money you have now is worth more
than the identical sum in the future due to its potential earning capacity.
Statement II: Present value is the value of a current asset at a future date based on an
assumed rate of growth.
A. Both Statements are true B. Only Statement 1 is true
C. Only Statement II is true D. Both Statements are false
II. Problem Solving.
Directions: Solve the problems correctly as you can, write the solutions in your notebook.
1. Marife is receiving ₱ 2,000 annually for the next 5 years and she invested each payment at 5%.
How much would Harry have at the end of the five-year period?
2. You invested ₱ 10,000.00 for 3 years at 9% compute the proceeds from the investment will all be
collected at the end of 3 years.
3. What is the present value of ₱ 15,000.00 received in two years if the interest rate is 12% per year
compounded semi-annually?
4. How much should be deposited now at 10% compounded monthly to have ₱ 10,000 in 4 years.
5. Your father told you that she will give you funds for your education. She gave you two options:
a. Receive the money now in the amount of ₱ 100,000.00 or
b. Receive ₱ 110,000 a year after. The available investment opportunities to you provide a
12% rate of return. Which option would you prefer?

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Reflection

Complete the following statements. Write your statements in your notebook.

1. As an ABM student, I have learned… .

2. As an ABM student, it is very important for us to learn… .

3. Using the knowledge I have learned in this lesson, I will be able to...
.

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18
Glossary
Future value (FV) - is the value of a current asset at a future date based on an assumed rate of
growth.

Present value (PV) - is the current value of a future sum of money or stream of cash flows given a
specified rate of return.

Time value of money (TVM) - is the concept that money you have now is worth more than the
identical sum in the future due to its potential earning capacity.

Appendices

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References
Books:

Cayanan, Arthur S. and Borja, Daniel Vincent H. Business Finance (Sampaloc Manila, Rex Book
Store, Inc., 2017) 96-98.

Faylogna, Frelie B. et. al. General mathematics (Sampaloc Manila, Vicarich Publications and
Trading, Inc, 2017) 148-150.

Online Sources:

Applied Economics. Accessed: January 28,2021

https://drive.google.com/drive/folders/1I27TPCO9YyAiJFYaSOXYBrx0lICM9J9z?fbclid=IwAR0
kT-pG5FP6onT0pnrL1iBds3tNI0-ZNryjAw5_029OtKb54nHJ5i-Y9ys

Future Value. Accessed February 2, 2021

https://www.investopedia.com/terms/f/futurevalue.asp

Future Value. Accessed: January 29, 2021

https://investinganswers.com/dictionary/f/future-value-fv

Present Value. Accessed: February 2, 2021

https://www.investopedia.com/terms/p/presentvalue.asp

Understanding Time Value of Money. Accessed: February 2, 2021

https://www.investopedia.com/articles/03/082703.asp

Time Value of Money. Accessed: February 1, 2021

https://www.investopedia.com/terms/t/timevalueofmoney.asp#:~:text=The%20time%20value%20of