Present Value / Future Value payments can be illustrated with the following chart: $600,000 2 3 5 6 7 8 9 10 12 Months 11 BOK 50k TSOK TSOK 50K 50k 150k 50k 150K 50k SOK SOK NA The black arrows represent the 12 months retention of $50,000 (50k) each. At the end of the year the contractor will receive a check for $1,200,000. However, if the owner had not retained the money, the contractor could have received interest on this amount, or more likely, would not have paid interest on the amount borrowed to cover his costs. To investigate this use the Present Value basis formulas to complete the table: The current interest rate is 3%. Fill in the table to determine the present values of a 10% retention Note, the interest rate per month is 03/12. The FV is $50,000 for each entry and the number of periods Present value Present value Month retention is held Number of months to calculate interest 6 71288 5 Month Number of retention is months to held calculate interest 1 12 2 11 3 10 4 9 5 8 6 7 Totals The total for all 12 months - 4 7 8 9 10 11 12 3 2 1 Present Value / Future Value payments can be illustrated with the following chart: $600,000 2 3 5 6 7 8 9 10 12 Months 11 BOK 50k TSOK TSOK 50K 50k 150k 50k 150K 50k SOK SOK NA The black arrows represent the 12 months retention of $50,000 (50k) each. At the end of the year the contractor will receive a check for $1,200,000. However, if the owner had not retained the money, the contractor could have received interest on this amount, or more likely, would not have paid interest on the amount borrowed to cover his costs. To investigate this use the Present Value basis formulas to complete the table: The current interest rate is 3%. Fill in the table to determine the present values of a 10% retention Note, the interest rate per month is 03/12. The FV is $50,000 for each entry and the number of periods Present value Present value Month retention is held Number of months to calculate interest 6 71288 5 Month Number of retention is months to held calculate interest 1 12 2 11 3 10 4 9 5 8 6 7 Totals The total for all 12 months - 4 7 8 9 10 11 12 3 2 1