3. What is the value in year 20 of a $1,000 cash flow made in year 8 if interest
ID: 2631851 • Letter: 3
Question
3. What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years? 3. What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years? 3. What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years? 3.Explanation / Answer
First we will calculate future value of $1000 in year 13 with interest rate of 15%.
Future value = Present Value (1 + Interest rate) Years
Substitute:
= $1,000 (1.15)6= $2,313.06
Now, we will calculate future value of $2,313.06 in year 20 with interest rate of 18%.
Substitute:
= $2,313.06 (1.18)7= $7,368.19.
The value of $1000 in year 20 will be $7,368.19.
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.