Question

For the mixed stream of cash flows shown in the following​ table. determine the future value at the end of the final year if deposits are made into an account paying annual interest of 15​%, assuming that no withdrawals are made during the period and that the deposits are​ made:

a. At the end of each year.

b. At the beginning of each year

Year	Cash flow stream
1	​$34,800
2	​$29,000
3	​$23,200
4	$11,600
5	​$5,800

Answer 1

a

Future Value
Last period=	5
Compounding rate	15.000%
Year	0	1	2	3	4	5
Cash flow stream	0	34800	29000	23200	11600	5800
Compounding factor	2.011	1.749	1.521	1.323	1.150	1.000
Compounded cash flows	0.000	60865.417	44105.375	30682.000	13340.000	5800.000
FV = Sum of compounded cash flows
FV=	154792.79
Where
Compunding factor =	(1 + rate)^(Last period-Corresponding period in years)
Compounded Cashflow=	Cash flow stream*compounding factor

b

Future Value
Last period=	5
Compounding rate	15.000%
Year	0	1	2	3	4	5
Cash flow stream	34800	29000	23200	11600	5800	0
Compounding factor	2.011	1.749	1.521	1.323	1.150	1.000
Compounded cash flows	69995.230	50721.181	35284.300	15341.000	6670.000	0.000
FV = Sum of compounded cash flows
FV=	178011.71
Where
Compunding factor =	(1 + rate)^(Last period-Corresponding period in years)
Compounded Cashflow=	Cash flow stream*compounding factor