What is the future value of the following cash flows at the end of year 3 if the interest rate is 7.25% ? The cash flows occur at the end of each year.

Question

Quizplus · Accepted Answer

To calculate the future value of the cash flows, we can use the formula:

FV = CF1 x (1 + r)^n-1 + CF2 x (1 + r)^n-2 + CF3 x (1 + r)^n-3

where CF1, CF2, and CF3 are the cash flows in years 1, 2, and 3 respectively, r is the interest rate, and n is the number of years.

Plugging in the values from the question, we get:

FV = 2000 x (1 + 0.0725)^2 + 3500 x (1 + 0.0725)^1 + 5500 x (1 + 0.0725)^0
FV = £8,758.04

Therefore, the best choice is option C, which is £10,073.99.

What Is the Future Value of the Following Cash Flows