Practice 4-1 Problem Solutions.xlsx | 100% Correct Answers
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Question 1 FV of mixed stream (5 years) You are given an investment to analyze. The cash flows from this investment are End of year 1. $1,043 2. $3,646 3. $691 4. $2,675 5 ... . 883 What is the future value of this investment at the end of year five if 6.58 percent per year is the appropriate interest (discount) rate? Solution: Take each cash flow, treat as present value and then go year by year, get future value of each cash flow and then sum the cash flows. Year 1 $1,043 $1,345.82 2 $3,646 $4,414.12 3 $691 $784.93 4 $2,675 $2,851.02 5 $883 $883.00 $10,278.88 Question 2 - FV of mixed stream (4 years) 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 11.41 percent, compounded annually. How much is this investment worth at the end of year four? End of year 1. $262 2. $875 3. $309 4. $283 Solution: [Show More]
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