John and Marsha are in an argument about an investment which requires a series of six annual deposits.
If an investor decides to invest, he/she has to deposit $30,000 at the end of year 1, $30,000 at the end of year 2, $30,000 at the end of year 4, $30,000 at the end of year 5, $30,000 at the end of year 6 and $30,000 at the end of year 7. The deposited amounts grow at a rate of 5% p.a.
The argument is about the nature of the cash flow stream of the six deposits – whether the cash flows is an
You are required to assist both in coming to a resolution of the argument by doing as follows:
- i) Using the cash flow pattern of deposits presented above, compute the value of the investment at the end of year 7.
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