Two years ago, you opened an investment account and deposited $5,000. One year ago, you added another $2,000 to the account. Today, you are making a final deposit of $7,500. How much will you have in this account three years from today if you earn a 14 percent
To calculate: The present value at 14% for 3 years
Introduction:
The present value of future cash flows that is discounted at a particular rate of discount is called as present value.
Answer to Problem 6.1CTF
Person X will have $24,116.57 in his account after three years from the present.
Explanation of Solution
Given information:
Person X has opened an investment account in which he had deposited $5,000 before two years and added $2,000 to it before one year. Presently, he made a final deposit of $7,500. The return rate is 14%.
Formula to calculate the future value:
Note: PV denotes the present value, r denotes the rate of discount and t denotes the number of years.
Compute the future value:
Hence, the future cash flow is $24,116.57.
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Chapter 6 Solutions
FUND. OF CORPORATE FINANCE (LL)