Answer :
The present value of the account is $12,500 if the annual interest payment is $1000.
Present value can be described as the value right now of a certain amount of money in the future.
As the savings account will pay interest at a rate of 8% per year and the annual interest payment is $1000, then the present value can be determined by dividing the annual interest payment by the annual interest rate as follows;
$1000 = 8% of x
Here x represents the present value
1000 = (8 ÷ 100)x
1000 = 0.08x
x = 1000 ÷ 0.08
x = $12,500
Therefore, the present value of the account is calculated to be $12,500 if the savings account will pay interest at a rate of 8% and the annual interest payment is $1000.
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