Question

1) You receive $5,000 at the end of every year for three years. What is the present value of these receipts if you earn eight percent compounded annually

2)What amount will be accumulated in four years if $10,000 is invested today at six percent interest compounded annually?

Answer 1

1)	Present value of the receipts
	Year	Cash Flow	PV Factor	PV Of Cash Flow
	a	b	c=1/1.08^a	d=c*b
	1	$         5,000	0.925925926	$             4,629.63
	2	$         5,000	0.85733882	$             4,286.69
	3	$         5,000	0.793832241	$             3,969.16
	Present value			$           12,885.48
2)
	Future value = PV * (1+r)^n
	Where,
	PV = Present value
	t= interest rate
	n= number of years
	=$10000*(1+0.06)^4
	=$12624.77
	amount will be accumulated in four years =$12624.77
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