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Problem 5-4 Future Values (L01) Compute the future value of a $110 cash flow for the following combinations of rates and time
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Answer #1

Answer-

Future value of a cash flow=
PV( 1+ r/m)mt +PV   

PV= present value of cash flow

r= rate of interest

m= Compounding frequency

t= number of years

(a) PV= $110 r= 7%. t= 10 years

FV= 110( 1+0.07)10+ 110= $216.39

(b) PV= $110 r= 7%. t= 20years

FV= 110( 1+0.07)20+ 110= $425.67

(c) PV= $110 r= 3%. t= 20years

FV= 110( 1+0.03)20+ 110= $198.67

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