An investment paying $2000 in 2 years,$6000 in 4 years and $5000 in 12 years at an interest rate of 5% per annum has a present value of:
A)$9534.46.
B)$6505.29.
C)$7354.21.
D)$12 090.49.

Question

Quizplus · Accepted Answer

The present value (PV) of future cash flows is calculated using the formula: PV = CF / (1 + r)^n, where CF is the cash flow, r is the interest rate, and n is the number of years. Calculating for each cash flow: PV1 = 2000 / (1.05)^2, PV2 = 6000 / (1.05)^4, PV3 = 5000 / (1.05)^12. Adding these gives the total present value of $9534.46.

An Investment Paying $2000 in 2 Years,$6000 in 4 Years