Question

You receive five annual cash flows of $10,000 with the first cash flow being received today and the last cash flow occurring 4 years from today (i.e., there are 5 total cash flows). You place each $10,000 cash flow into the bank as soon as you receive it. The bank's APR (r) is 6% and compounding is done on an annual basis. Ten years from today, you take all your money out of the bank. How much total do you have

Answer 1

Answer:

FV= $75,437.02

Explanation:

Giving the following information:

Number of cash flows= 5

Cash flow= $10,000

Total number of periods= 10 years

Interest rate= 6% compounded annually

First, we need to calculate the future value of the 5 cash flows in 5 years using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {10,000*[(1.06^5) - 1]} / 0.06

FV= $56,370.93

Now, the value at the end of 10 years:

FV= PV*(1+i)^n

FV= 56,370.93*(1.06^5)

FV= $75,437.02