1. What is the value at the end of year 7 for the following annual cash flow str
ID: 2612300 • Letter: 1
Question
1. What is the value at the end of year 7 for the following annual cash flow stream if the interest rate is 7% compounded monthly?
Time Cash Flow
0 $1,000
1 $1,500
2 0
3 $3,000
4 0
5 $2,000
Please Explain using Financial calculator.
Explanation / Answer
1. What is the value at the end of year 7 for the following annual cash flow stream if the interest rate is 7% compounded monthly?
Time Cash Flow
0 $1,000
1 $1,500
2 0
3 $3,000
4 0
5 $2,000
Effective Annual Interest rate = (1+7%/12)^12 - 1 = 7.229%
Value at the end of year 7 = 1000*(1+7.229%)^7 + 1500*(1+7.229%)^6 + 3000*(1+7.229%)^4 + 2000*(1+7.229%)^2
Value at the end of year 7 = $ 10,175.92
Note: You May use above equation in nomral as well as Financial calculator to calculate Value at the end of year 7
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