Answered: What is the future value of four cash…

What is the future value of four cash flows of $500 to be received at the end of each of 4 years with interest compounded annually at 6% (rounded to nearest dollar)? $2,030 $2,171 $2,187 $2,819

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1MC

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

What is the future value of four cash flows of $500 to be received at the end of each of 4 years with interest compounded annually at 6% (rounded to nearest dollar)?

$2,030
$2,171
$2,187
$2,819

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