At an interest rate of 12.5% per annum,cash flows of $2000 in 2 years,$12 000 in 7 years and $8000 in 20 years have a future value in 20 years of:
A)$73 730.20.
B)$71 593.52.
C)$80 147.38.
D)$70 994.74.

Question

Quizplus · Accepted Answer

The future value of each cash flow is calculated by compounding it to 20 years at 12.5% per annum. The future value of $2000 in 2 years is $2000*(1+0.125)^(20-2), the future value of $12000 in 7 years is $12000*(1+0.125)^(20-7), and the future value of $8000 in 20 years is $8000. Adding these gives the total future value.

At an Interest Rate of 12