Question

For the mixed stream of cash flows shown in the following​ table, LOADING...​, determine the future value at the end of the final year if deposits are made into an account paying annual interest of 12​%, assuming that no withdrawals are made during the period and that the deposits are​ made: a. At the end of each year. b. At the beginning of each year.

Year 1 $ 30,000

2 $ 25,000

3 $ 20,000

4 $ 10,000

5$ 5,000

Answer 1

Present value = Future value/(1+i)^n

i = interest rate per period

n= number of periods

a)

Future value = 30000 * 1.12^4 + 25000 * 1.12^3 + 20000 * 1.12^2 + 10000 * 1.12 + 5000

= 123616.78

b)

Future value = 30000 * 1.12^5 + 25000 * 1.12^4 + 20000 * 1.12^3 + 10000 * 1.12^2 + 5000 * 1.12

= 138450.80