Question

An investment will pay $100 at the end of each of the next 3 years, $250 at the end of Year 4, $400 at the end of Year 5, and $600 at the end of Year 6. If other investments of equal risk earn 6% annually, what is its present value? Round your answer to the nearest cent. $ If other investments of equal risk earn 6% annually, what is its future value? Round your answer to the nearest cent.

Answer 1

a.	Present Value		$ 1,187.20
	Working;
	Year	Cash flow	Discount factor	Present Value
	a	b	c=1.06^-a	d=b*c
	1	$         100	0.9434	$               94.34
	2	100	0.8900	89.00
	3	100	0.8396	83.96
	4	250	0.7921	198.02
	5	400	0.7473	298.90
	6	600	0.7050	422.98
	Total			1,187.20
b.	Future Value		$ 1,684.07
	Working:
	Year	Cash flow	Future Value of 1	Future Value
	a	b	c=1.06^(6-a)	d=b*c
	1	$         100	1.3382	$            133.82
	2	100	1.2625	126.25
	3	100	1.1910	119.10
	4	250	1.1236	280.90
	5	400	1.0600	424.00
	6	600	1.0000	600.00
	Total			1,684.07