Question

The value of the following cash flows four years from today is $7,430.77. The interest rate is 4.5 percent. What is the value of the Year 3 cash flow? Year 1 Cash Flow $1,540 1,692 AWN 2,690 Multiple Choice o SA.35 67 $1,135.67 o $1,086.77 o $995.18 o $1,039.97 o $1,186.78

Answer 1

Year	Cash flow	If year3 cash flow is 1135.67	If year3 cash flow is 1086.77	If year3 cash flow is 995.18	If year3 cash flow is 1039.97	If year3 cash flow is 1186.78
1	1540	=1540*(1+4.5%)^3	1,757.40	=1540*(1+4.5%)^3	1,757.40	=1540*(1+4.5%)^3	1,757.40	=1540*(1+4.5%)^3	1,757.40	=1540*(1+4.5%)^3	1,757.40
2	1692	=1692*(1+4.5%)^2	1,847.71	=1692*(1+4.5%)^2	1,847.71	=1692*(1+4.5%)^2	1,847.71	=1692*(1+4.5%)^2	1,847.71	=1692*(1+4.5%)^2	1,847.71
3	?	=1135.67*(1+4.5%)^1	1,186.78	=1086.77*(1+4.5%)^1	1,135.67	=995.18*(1+4.5%)^1	1,039.96	=1039.97*(1+4.5%)^1	1,086.77	=1186.78*(1+4.5%)^1	1,240.19
4	2690	=2690*(1+4.5%)^0	2,690.00	=2690*(1+4.5%)^0	2,690.00	=2690*(1+4.5%)^0	2,690.00	=2690*(1+4.5%)^0	2,690.00	=2690*(1+4.5%)^0	2,690.00
			7,481.88		7,430.78		7,335.07		7,381.87		7,535.29
Answer : 3rd year cash flow 1,086.77