Let t denote years. Consider the following stream of payments: t = Payment 1 $20
ID: 2685723 • Letter: L
Question
Let t denote years. Consider the following stream of payments:
t = Payment
1 $200
2 $400
a. A. Calculate the future value at t = 3 of the payment at t = 1 given an interest rate is 1% (r = .01).
b. B. Calculate the future value at t = 3 of the payment at t = 2 given an interest rate is 1% (r = .01).
c. C. With the present value of a set of payments, the future value of a set of payments is simply the sum of the future values of the individual payments. Given your answers to parts a and b above, what is the future value at t = 3 of the stream of payments listed in the table above?
Please show how you got the answer. I have been using the formula FV = PV(1+r)^t but I can't get an answer that makes sense. Any little bit helps! Thank you!
C
Explanation / Answer
A. FV= 200x1.01^2=$204.02 B. FV= 400x1.01^1=$404 C FV= 200x1.01^2+(400x1.01^1)= $608.02
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