What is the present value of the following future amount?
$397,816 to be received 20 years from now, discounted back to the present at 5 percent, compounded annually.

Round the answer to two decimal places.

The present value (PV) of a future amount can be calculated using the formula:

\[
PV = \dfrac{FV}{(1 + r)^n}
\]

Where:
- $ FV $ is the future value, which is $397,816.
- $ r $ is the annual interest rate (or discount rate), which is 5% or 0.05.
- $ n $ is the number of years, which is 20.

Substituting the values into the formula:

\[
PV = \dfrac{397,816}{(1 + 0.05)^{20}}
\]

Let's calculate that.The present value of $397,816 to be received 20 years from now, discounted at 5% compounded annually, is **$149,932.67** when rounded to two decimal places.

Do you have any questions or would you like further details on the calculation?

Here are 5 related questions:
1. How does changing the interest rate affect the present value?
2. What is the future value if the present value is known and compounded at 5% for 20 years?
3. How would the calculation change if the interest were compounded semi-annually instead of annually?
4. What if the amount were received 10 years from now instead of 20?
5. How do inflation rates influence the discount rate in present value calculations?

**Tip:** The longer the time period or higher the interest rate, the smaller the present value of future money will be.

What is the present value of the following future amount? $397,816 to be received 20 years from now, discounted back to the present at 5 percent, compounded annually. Round the answer to two decimal places.

Learn how to calculate the present value of $397,816, discounted at 5% interest compounded annually over 20 years. This example covers the core concept of the time value of money and uses the present value formula. Suitable for advanced high school or college-level students.

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