Exercise

Present value

Luckily for you, there is a module called numpy which contains many functions which will make your life much easier when working with financial values.

The .pv(rate, nper, pmt, fv) function, for example, allows you to calculate the present value of an investment as before with a few simple parameters:

  • rate: The rate of return of the investment
  • nper: The lifespan of the investment
  • pmt: The (fixed) payment at the beginning or end of each period (which is 0 in our example)
  • fv: The future value of the investment

You can use this formula in many ways. For example, you can calculate the present value of future investments in today's dollars.

Instructions

100 XP
  • Import numpy as np.
  • Using NumPy's .pv() function, compute the present value of an investment which will yield $10,000 15 years from now at an inflation rate of 3% per year and assign it to investment_1.
  • Compute the present value of the same investment, but with a time horizon of only 10 years and an inflation rate of 5%, assigning it to investment_2.