Question

Find the present value of $4,543 discounted for 6 years at 13%. Assume quarterly compounding. (round to the nearest whole dollar)

Consider the following cash flows and calculate the Present Value of this cash flow stream if the interest rate is 6%.  Please include two decimals in your answer and a negative if appropriate

Year 0: $-285

Year 1: $133

Year 2: $0

Year 3: $0

Year 4: $457

Answer 1

Q-1)Future Value in 6 years = $4543

Calculating its Present Value:-

Where,

r = Interest rate = 13%

n= no of periods = 6 years

m = no of times compounding in a year = 4 (compounded quarterly)

Present Value = $2109

Q-2)

Calculating the Present Value of cashflow Stream:-

Year	Cash Flow Stream ($) [(a)]	PV Factor @8% [(b)]	Present Value of Cash Flow Stream ($) [(a)*(b)]
0	(285.00)	1.00000	(285.00)
1	133.00	0.94340	125.47
2	0	0.89000	0
3	0	0.83962	0
4	457.00	0.79209	361.99
			202.46

So, the Present Value of cashflow Stream is $202.46

Note- PV Factor@6% can be taken from PVAF Table or calculated using this formula which is = 1/(1+0.06)^n

where, n = Respective year.

For example, PV Factor@6% of 2nd year = 1/(1+0.6)^2 = 1/1.1236 = 0.89000

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