Question

You receive $100 today, $200 in one year, and $300 in two years. if you deposit these cash flows into an account earning 10 percent, the value in the account three years from now is?

Answer 1

Answer:

$628.49

Explanation:

Cash flows                     Discount factor      Future value

$100                         1.1449                $114.49

$200                         1.07                   $214

$300                          1                        $300

Future value                                                  $628.49

The discount factor is as follows

= (1 + interest rate)^number of years

For $100 the year is 2

For $200 the year is 1

For $300 the year is 0