I found the example complicated. Real learning comes from simplifying. In the case of the provided example, it is trivial to simplify.
$100 is worth $121 after two 10% interest cycles. The PV formula asks the reverse: what is $121 two cycles out, worth today (what is its present value)? In reverse, we can calculate that by dividing $121 with 1.1 twice. That's pretty much what the formula is : FV/(1 + i)^N or $121/((1.1)^2) = $100.
$100 is worth $121 after two 10% interest cycles. The PV formula asks the reverse: what is $121 two cycles out, worth today (what is its present value)? In reverse, we can calculate that by dividing $121 with 1.1 twice. That's pretty much what the formula is : FV/(1 + i)^N or $121/((1.1)^2) = $100.
kapish?