Question

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.

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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please answer in excel

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