Question

What is the FV at the end of year 3 of the following cash flow stream if the quoted interest rate is 15 percent, compounded quarterly?

Year0=$0 Year1=$200 Year2=$200 Year3=$200. (WITH EXPLANATION PLEASE and Manual + Calculator solution)

Answer 1

Effective annual rate = (1 + r / n)^n - 1
= (1 + 15% / 4)^4 - 1
= 1.15865 - 1
= 15.865%

FV = ($200 * (1+15.865%)^2) + ($200 * (1+15.865%)) + $200
= $268.4940 + $231.73 + $200
= $700.22

FV = $700.22