Question

Given an annual effective rate of interest of 10%, for a 10,000 investment made today; an investor receives 1,000 in one year, X in two years and $5,000 in three years. Find X

Answer #2

Year |
Cashflow |
[email protected]% |
Cashflow*PVF |

1 | 1,000 | 0.909 | 909 |

2 | X | 0.826 | .826X |

3 | 5,000 | 0.751 | 3,755 |

**Present Value of Investment =
Cashflow*PVF**

10,000 **=**
909+.826X+3755

.826x = 10,000-909-3755

= 5336

X = 5336/.826

**X = 6460.05**

answered by: anonymous

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Year
0
1
2
3
4
5
6
7
8
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1
2
3
4
5
6
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$ (1,000)
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