Question

$1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and $3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, what will be their combined future value at the end of ye

Answer 1

Answer:

Their combined future value will be 8,141.59.

Explanation:

Each deposit is invested at 12%, but for a different amount of years. So, the best thing would be to separate the three, calculate their value at the end of the third year for separated, and then obtain the grand total by adding up the results.

• First deposit = 1,200. It is invested for three years. The value at the end of year 3 is 1,200*(1.12)^3 = 1,685.91

• Second deposit = 2,200. It is invested for two years. The value at the end of year 3 is 2,200*(1.12)^2 = 2,759.68

• Third deposit = 3,300. It is invested for one years. The value at the end of year 3 is 3,300*(1.12) = 3,696.00
• The sum of the three deposits is 8,141.59.