We need to calculate the present value (the value at time period 0) of receiving a single amount of $1,000 in 20 years. The interest rate for discounting the future amount is estimated at 10% per year compounded annually.

The following timeline depicts the information we know, along with the unknown component (PV):

 

PV = ?? FV = $1,000 +1 year +1 year + 1 year + 1 year 1 2 3 19 20 n= 20 years;i = 10% per year