Question

What single amount, at the end of the fourth year, is equivalent to a uniform annual...

What single amount, at the end of the fourth year, is equivalent to a uniform annual series of $5,000 per year for 10 years, if the interest rate is 8% per year, compounded  annually?

* Answer to expert question. This is what was given so not sure on your question about cash flows.

Homework Answers

Answer #1
Interest Rate = 8%
Time Period = 10 Years
Annual Series Payment = $ 5,000
Present Value of Series = $ 5,000 * PVAFdue(8%,10 years)
Present Value of Series = $ 5,000 * 7.2475
Present Value of Series(at the beginning of Year1) = $ 36,237.5
Single amount at the end of 4th year = $ 36,237.5 * FV(8%,4 Years)
Single amount at the end of 4th year = $ 36,237.5 * (1+0.08)^4
Single amount at the end of 4th year = $ 36,237.5 * 1.3605
Single amount at the end of 4th year = $ 49,300.72
Computation of PVAFdue:
r 1+r (1+r)^-(n-1) 1- [(1+r)^-n] [1- [(1+r)^-n]] /r P{1+ [1- [(1+r)^-n]] /r}
8% 1.0800 0.5002 0.4998 6.2475 7.2475
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