What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4, and increase to 6 percent in the remaining years?
A) $1,215.51
B) $1,238.77
C) $2,970.03
D) $2,982.74

Question

Quizplus · Accepted Answer

To find the future value in year 6 of a $1,000 cash flow made in year 2, we need to compound the cash flow using the given interest rates. From year 2 to year 4, the interest rate is 5%, and from year 4 to year 6, it is 6%. The calculation is as follows: $1,000 * (1.05)^2 * (1.06)^2 = $1,238.77.

What Is the Value in Year 6 of a $1,000