At a rate of 10.0%, what is the future value of the following cash flow stream? Years: 1 4 CFs: $0 $75 $225 $0 $300 O a. $672 O b. $746 O c. $726 d. $820
At a rate of 10.0%, what is the future value of the following cash flow stream? Years: 1 4 CFs: $0 $75 $225 $0 $300 O a. $672 O b. $746 O c. $726 d. $820
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![**Future Value of Cash Flow Stream**
**Problem Statement:**
At a rate of 10.0%, what is the future value of the following cash flow stream?
**Cash Flows by Year:**
- Year 0: $0
- Year 1: $75
- Year 2: $225
- Year 3: $0
- Year 4: $300
**Multiple Choice Options:**
a. $672
b. $746
c. $726
d. $820
e. $544
To solve this, calculate the future value (FV) of each cash flow at Year 4 using the formula for future value:
\[ FV = CF \times (1 + r)^n \]
Where:
- \( CF \) = Cash Flow
- \( r \) = Interest rate (10% or 0.10)
- \( n \) = Number of years until Year 4
Calculate the future value of each cash flow and sum them to find the total future value. Compare with the options provided.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8ede43bb-e880-4024-8d83-4554574c0cce%2F4020c6d0-7792-4189-baad-f46d2175058d%2F0h8ybn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Future Value of Cash Flow Stream**
**Problem Statement:**
At a rate of 10.0%, what is the future value of the following cash flow stream?
**Cash Flows by Year:**
- Year 0: $0
- Year 1: $75
- Year 2: $225
- Year 3: $0
- Year 4: $300
**Multiple Choice Options:**
a. $672
b. $746
c. $726
d. $820
e. $544
To solve this, calculate the future value (FV) of each cash flow at Year 4 using the formula for future value:
\[ FV = CF \times (1 + r)^n \]
Where:
- \( CF \) = Cash Flow
- \( r \) = Interest rate (10% or 0.10)
- \( n \) = Number of years until Year 4
Calculate the future value of each cash flow and sum them to find the total future value. Compare with the options provided.
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