$498.62 is the value of present value on $1,200 to be received in 18 years.
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Present value is use to determine the current value of an amount of money.
- The formulae for deriving Present value is [tex][Cashflow / (1 + Interest rate)^{time}][/tex]
Information given are
Future value = $1,200
Years = 18 years
Interest rate = 5%
Present value = $1,200 / (1 + 5%)^18
Present value = $1,200 / (1.05)^18
Present value = $1,200 / 2.40661923369
Present value = $498.6247858412045
Present value = $498.62
In conclusion, the present value of the amount $1,200 received in 18 years at 5% is $498.62.
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