Question

You are to receive the following payments at the end of the following periods:

Year 1 : $250
Year 2: $300
Year 3: $450

The interest rate is 15% per year.

Required:
What is the future value of these cash flows 20 years from now?

Answer 1

Answer: $12,113.14

Explanation:

Find out the future value of each payment 20 years from now then sum up the values.

Year 1:

= 250 * ( 1 + 15%)¹⁹

= $3,557.94

Year 2:

= 300 * ( 1 + 15%)¹⁸

= $3,712.636

Year 3:

= 450 * ( 1 + 15%)¹⁷

= $4,842.5688

Future value of all:

= 3,557.94 + 3,712.636 + 4,842.5688

= $12,113.14