I have been taught that to increase and decrease a number by a percentage we do the following: e.g. Increase by 5% and decrease by 5%. 100 * 1.05 = 105. (increase) 100* 0.95 = 95 (decrease) When I am looking at a present value formula we are told to do the following:
$$PV = \dfrac{FV}{(1+r)n}$$
Can someone explain to me why the two methods yield different results. Are they not essentially attempting to do the same thing i.e. reduce a given number by 5%? 100/1.05 = 95.23 100*0.95 = 95 I just can't seem to wrap my head around the concept, would really appreciate any help.