What is the present value of \( \$ 1,200 \) to be received in 18 years invested at a rate of \( 5 \% \) ?

To find the present value (PV) of \( \$1,200 \) to be received in 18 years at a \( 5\% \) interest rate, we can use the formula: \[ PV = \frac{FV}{(1 + r)^n} \] Where: - \( FV \) is the future value (\$1,200), - \( r \) is the interest rate (0.05), - \( n \) is the number of years (18). Plugging in the numbers: \[ PV = \frac{1200}{(1 + 0.05)^{18}} = \frac{1200}{(1.05)^{18}} \approx \frac{1200}{2.406619} \approx 498.09 \] So, the present value of \( \$1,200 \) received in 18 years at \( 5\% \) interest is approximately \( \$498.09 \). By understanding the time value of money, you can better appreciate how \( \$1 \) today can be worth more than \( \$1 \) in the future. That's because the money you have now can be invested to grow over time! Use financial calculators or spreadsheet tools for quick PV calculations—there’s no need for complex math when technology can handle the heavy lifting for you!