You have just purchased an investment that generates the cash flows shown below for the next...
You have just purchased an investment that generates the cash flows shown below for the next four years. You are able reinvest these cash flows at 8.23 percent, compounded annually. How much is this investment worth at the end of year four? End of year 1.$125 2.$1,169 3.$645 4.$217
Homework Answers
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
A=125*(1.0823)^3+1169*(1.0823)^2+645*(1.0823)+217
which is equal to
=$2442.89(Approx).
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