What is the present value of $803 to be received 18 years from now at 10% discount rate.
To calculate the present value of a future amount, you need to use the present value formula. The formula is:
Present Value = Future Value / (1 + r)^n
Where:
- Future Value is the amount to be received in the future
- r is the discount rate (expressed as a decimal)
- n is the number of periods (in this case, years)
In this scenario:
- Future Value is $803
- The discount rate is 10% or 0.10 (as a decimal)
- The time period is 18 years
By plugging these values into the formula, we can calculate the present value:
Present Value = $803 / (1 + 0.10)^18
Now, let's solve the equation:
1 + 0.10 = 1.10
1.10^18 ≈ 4.169865
Present Value = $803 / 4.169865 ≈ $192.41
Therefore, the present value of $803 to be received 18 years from now at a 10% discount rate is approximately $192.41.