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I was watching a video wherein the teacher said that in order to generate $ 1,000,000 in three years’ time through simple interest, we need to invest a principal amount of $ 856,200 today.
How is this amount arrived at??
Then, the teacher proceeds to explain that in order to have $ 1,000,000 in three years’ time through compound interest, we need to invest $ 850,000 today.
Present Value = 1000000 / (1+5.6%) ^ 3 = $ 849, 197.
I just don’t understand how present value using simple interest is computed.
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