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Given an annual effective rate of interest of 10%, for a 10,000 investment made today; an...

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

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Answer #2
Year Cashflow PVF@10% 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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