Question

Assuming an interest rate of 5.3 percent, what is the value of the following cash flows four years from today?

Assuming an interest rate of 5.3 percent, what is the value of the following cash flows four years from today? کا یہ Cash Flow $2,975 4,020 5,860 7,945 بیا هم Multiple Choice

Answer 1

Note: It is assumed that cash flows are invested at the end of each year and not at the beginning of the year. This is more suitable assumption as year given in question is 1,2,3,4 and not 0,1,2,3.

To calculate value of cash flows 4 years from now, their future value is to be calculated:

Year	Cash Flows	FV	FV of Cash Flows
1	2,975.00	1.16758	3,473.54
2	4,020.00	1.10881	4,457.41
3	5,860.00	1.05300	6,170.58
4	7,945.00	1.00000	7,945.00
Total			22,046.53

Thus the correct answer is 22,046.53