Question

In: Finance

You will be receiving the following payments from a friend -- $100 one year from now,...

You will be receiving the following payments from a friend -- $100 one year from now, $145 two years from now, and $125 three years from now. Calculate the present value of these payments given that the rate of interest is 6% per year. Also, calculate the future value of the payments in year three.

Solutions

Expert Solution

Discount rate 6.0000%
Cash flows Year Discounted CF= cash flows/(1+rate)^year Cumulative cash flow
                             -   0                                            -                                           -  
                 100.000 1                                     94.34                                  94.34
                 145.000 2                                   129.05                                223.39
                 125.000 3                                   104.95                                328.34

present value = 328.34

future value = 328.34 * 1.06^3 = 391.06


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