Question

Future Value of Uneven Cash Flow 22. You expect to receive $300, $400, $500, $300, $400 and $500 at the end of each year over the next 6 years. If an annual interest rate is 4 percent, what is the future value of this uneven cash flow stream? a. $2,636 23. You expect to receive $300, $400, $500, $300, $400 and $500 at the end of each year over the next 6 years. If an annual interest rate is 2 percent, what is the future value of this uneven cash flow stream? a. $2,515

Answer 1

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

1.A=300*(1.04)^5+400*(1.04)^4+500*(1.04)^3+300*(1.04)^2+400*(1.04)+500

=$2636

2.A=300*(1.02)^5+400*(1.02)^4+500*(1.02)^3+300*(1.02)^2+400*(1.02)+500

=$2515