Question 1185091: The present value of $800 to be received 13 years from now discounted back to the present at 8 percent is
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! if the 800 dollars is to be received 13 years from now, and the interest rate is 8% per year compounded annually, then:
the formula to use is:
f = p * (1 + r) ^ n
f is the future value
p is the present value
r is the interest rate per time period (the rate, not the percent).
n is the number of time periods.
the formula becomes:
800 = p * (1 + .08) ^ 13
to solve for the present value, divide both sides of this equation by (1 + .08) ^ 13 to get:
800 / (1 + .08) ^ 13 = p
solve for p to get:
p = 800 / 1.08 ^ 13 = 294.1583397.
what this says is:
if you got 294.1583397 today and invested it at 8% per year, compounded annually, you would have 800 at the end of the 13th year.
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