Question

An investment will pay $100 at the end of each of the next 3 years, $300 at the end of Year 4, $600 at the end of Year 5, and $700 at the end of Year 6.

1. If other investments of equal risk earn 9% annually, what is its present value? Round your answer to the nearest cent.

2. What is its future value? Round your answer to the nearest cent.

Answer 1

1. As the values receivable in the future are given, present value can be calculated as:-

Year	Amount	Present Value Factor	Present Value Factor	Present Value
0
1	100	=1/1.09	0.9174	91.7431
2	100	=(1/1.09)^2	0.8417	84.1680
3	100	=(1/1.09)^3	0.7722	77.2183
4	300	=(1/1.09)^4	0.7084	212.5276
5	600	=(1/1.09)^5	0.6499	389.9588
6	700	=(1/1.09)^6	0.5963	417.3871
	1900			1273.00

Thus Present value is $1273.

2. The amounts give are already the future values therefore future value shall be sum of actual future receipts = $1900