Question

An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4, $400 at the end of Year 5, and $550 at the end of Year 6. If other investments of equal risk earn 6% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $  

Future value: $  

Answer 1

B D A 1 Solution Present Value of Cashflows Year Cashflow 150 150 150 250 400 550 PVE @ 6% 0.943 0.890 0.840 0.792 0.747 0.705 PV 141.51 133.50 125.94 198.02 298.90 387.73 6 Total Present Value of Cashflows 1285.61 Future Value of Cashflows Year Cashflow 150 150 150 250 400 550 FVE @ 6% 1.338 1.262 1.191 1.124 1.060 1.000 PV 200.73 189.37 178.65 280.90 424.00 550.00 un 25 Total Future Value of Cashflows 1823.66 26 27 28

Answer 2

q Present Value Annuity: An investment will pay $150 at the end of each of the next 5 years, If other investments of equal risk earn 11% annually, what is its present value?

Answer 3

SOLUTION :

Discount rate, r = 6% = 0.06 

=> 1 = r = 1.06

PV 

= 150/1.06+150/1.06^2+150/1.06^3+250/1.06^4+400/1.06^5+550/1.06^6

= 1285.61 ($) (ANSWER).

FV 

= PV*1.06^6 

= 1285.61*1.06^6

= 1823.66 ($) (ANSWER)