PV = FV / (1 + r) ^ t
A person wants to purchase a house in two years. He expects that he would need to have $20,000 at that time to use as a down payment. The certificate of deposit pays 5% per year.
In this case, we know that the future value is $20,000 and time frame (2 years) and the interest rate (5% per year). Therefore, apply the above formula:-