Suppose you receive $100 at the end of each year for the nextthree years.What...

Suppose you receive $100 at the end of each year for the next three years.

What is the future value in three years at 8% interest?

Expert Solution

FV of Annuity :
Annuity is series of cash flows that are deposited at regular intervals for specific period of time.

FV of Annuity = CF [ (1+r)^n - 1 ] / r
r - Int rate per period
n - No. of periods

Particulars	Amount
Cash Flow	$ 100.00
Int Rate	8.000%
Periods	3

FV of Annuity = Cash Flow * [ [ ( 1 + r ) ^ n ] - 1 ] /r
= $ 100 * [ [ ( 1 + 0.08 ) ^ 3 ] - 1 ] / 0.08
= $ 100 * [ [ ( 1.08 ) ^ 3 ] - 1 ] / 0.08
= $ 100 * [ [1.2597] - 1 ] / 0.08
= $ 100 * [0.2597] /0.08
= $ 324.64
Future value = $ 324.64

jeff jeffy answered 2 years ago

Suppose you receive $100 at the end of each year for the next three years. a....

Suppose you receive $100 at the end of each year for the next three years. a. If the interest rate is 8% per annum (interest paid annually), what is the present value of these cash flows? b. What is the future value in three years of the present value you computed in part (a)? c. Assume that no withdrawals are made from the savings account until the end of the third year. What is the interest component? d. Compute the...

Suppose you receive $160 at the end of each year for the next three years. a....

Suppose you receive $160 at the end of each year for the next three years. a. If the interest rate is 8%, what is the present value of these cash flows? b. What is the future value in three years of the present value you computed in(a)? c. Suppose you deposit the cash flows in a bank account that pays 8% interest per year. What is the balance in the account at the end of each of the next three...

Suppose you receive $100100 at the end of each year for the next three years. a....

Suppose you receive $100100 at the end of each year for the next three years. a. If the interest rate is 9 %9%, what is the present value of these cash flows? b. What is the future value in three years of the present value you computed in (a)? c. Suppose you deposit the cash flows in a bank account that pays 9 %9% interest per year. What is the balance in the account at the end of each of...

a. You will receive an annuity payment of $1,200 at the end of each year for...

a. You will receive an annuity payment of $1,200 at the end of each year for 6 years. What will be the total value of this stream of income invested at 7% by the time you receive the last payment? b. How many years of investing $1,200 annually at 9% will it take to reach the goal of $12,000? c. If you plan to invest $1,200 annually for 9 years, what rate of return is needed to reach your goal...

You are to receive an end-of-year bonus of $50,000 increasing by $1000 for each of the...

You are to receive an end-of-year bonus of $50,000 increasing by $1000 for each of the next ten years. If MARR is 12% and inflation rate is anticipated to be 2%, what will be purchasing power?

A) You are expecting to receive $300 at the end of each year in years 3,...

A) You are expecting to receive $300 at the end of each year in years 3, 4, and 5, and then 500 each year at the end of each year in years 10 through 25, inclusive. If the appropriate discount rate is 9.2 percent, for how much would you be able to sell your claim to these cash flows today? B) You are paying an effective annual rate of 12.93 percent on your credit card. The interest is compounded monthly....

1. Suppose that one year from now you receive $450. At the end of the next...

1. Suppose that one year from now you receive $450. At the end of the next nine years you receive a payment that is 2% larger than the prior year. If the cost of capital is 11% what is this stream of cash flows worth today? 2. Suppose that one year from now you will receive $400 and that at the end of every year thereafter you will receive a payment that is 1% larger than the prior payment. If...

You will receive $697 at the end each year in years 1 through 10, $2,024 in...

You will receive $697 at the end each year in years 1 through 10, $2,024 in years 11 through 20, and $2,547 in years 21 through 30. How much is all this worth today, if the required rate of return is 8%? GDebi, Inc. plans to issue 5.5 percent coupon bonds, with annual coupon frequency, 14 years to maturity and $1000 face value. If the prevailing market yield on bonds of similar riskiness and maturity is 6.1 percent, what would...

1.Suppose that one year from now you receive $350. At the end of the next nine...

1.Suppose that one year from now you receive $350. At the end of the next nine years you receive a payment that is 4% larger than the prior year. If the cost of capital is 14% what is this stream of cash flows worth today? 2.Suppose that one year from now you will receive $1000 and that at the end of every year thereafter you will receive a payment that is 3% larger than the prior payment. If the cost...

Why would you prefer to receive $100 today rather than wait and receive $100 one year...

Why would you prefer to receive $100 today rather than wait and receive $100 one year from now? Prompts: For the first part of the discussion post, list all the potential explanations you can think of for the time value of money. For each cause, write a sentence or two about how it explains your preference for money today rather than money at some future date. Let’s see how many different explanations we can uncover. For the second part of...

Question