Calculate the net future value at year 2 for the following cashflows and interest rates...

Calculate the net future value at year 2 for the following cash flows and interest rates compounded quarterly (rounded $ to two places after the decimal). The year 0 cash flow is $399, the year 1 cash flow is $204, and the year 2 cash flow is $-155. The interest rate for the first period (year 0 to 1) is 3% and the interest rate for the second period (year 1 to 2) is 4.7%.

Expert Solution

FV = CF * FVF(r%, n)

FVF(r%, n) = ( 1 +r )^n

r = Int rate per qtr

n = Balance qtrs

As Int Rate for first 4 periods 3% ( 3% / 4 = 0.75% per qtr)

As Int Rate for second 4 periods 4.7% ( 4.7% / 4 = 1.175% per qtr)

Period	Bal Periods	CF	FVF Calculation	FVF	FV of CF
0	8	$ 399.00	(1.0075^4)(1.01175^4)	1.0796	$ 430.77
4	4	$ 204.00	1.01175^4	1.0478	$ 213.76
8	0	$ -155.00	1^0	1.0000	$ -155.00
Net FV					$ 489.53

jeff jeffy answered 2 years ago

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