Question

You have just received a windfall from an investment you made in a​ friend's business. She will be paying you

$ 36 comma 678$36,678

at the end of this​ year,

$ 73 comma 356$73,356

at the end of next​ year, and

$ 110 comma 034$110,034

at the end of the year after that​ (three years from​ today). The interest rate is

13.9 %13.9%

per year.

a. What is the present value of your​ windfall?

b. What is the future value of your windfall in three years​ (on the date of the last​ payment)?

Answer 1

(a): Present value = $163,211.75

Calculations:

Year	Amount ($)	1+r	PVIF = 1/(1+r)^n	PV = amount * PVIF
1	36,678.00	1.139	0.8780	32,201.93
2	73,356.00		0.7708	56,544.22
3	110,034.00		0.6768	74,465.61
			Total	163,211.75

(b): Future value = $241,169.62

Calculations:

Future value = 36,678*1.139^2 + 73,356*1.139^1 + 110,034*1.139^0

= 47583.14 + 83552.48 + 110034

= 241,169.62