Find PV of series of cash flows when interest rates are not constant. Find prese

Question

Find PV of series of cash flows when interest rates are not constant. Find present value given the following information. Erica deposited $2,000 in a savings account that pays 10 percent compound interest per year. At the end of five years, Erica withdraws only the interest on interest. How much docs she withdraw? In 1963, a McDonald's double hamburger cost 28 cents. In 1984, that same hamburger-well, not the same exact hamburger, but one just like it-cost $1 35. What was the annual rate of growth in a McDonald's hamburger's price from 1963 to 1984?

Explanation / Answer

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Year Cash flow Present value factor Present value 1 100 0.952                  95.24 2 200 0.907                181.41 3 300 0.864                259.15 4 400 1.262                504.99 5 500 1.191                595.51 6 600 1.501                900.44 7 700 1.403                981.79 Present value            3,518.52

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