Joey is planning to invest his savings in a fixed income fund. He manages to deposit $700 at the end of the first year, $500 at the end of the second year, $300 at the end of the third year, and $600 at the end of the fourth year. If the fund earns 6 percent interest each year, the terminal (future) value of this uneven cash flow stream at the end of Year 4 is _____.
A)$2,314
B)$1,833
C)$2,097
D)$2,355
E)$1,784

Question

Joey is planning to invest his savings in a fixed income fund. He manages to deposit $700 at the end of the first year, $500 at the end of the second year, $300 at the end of the third year, and $600 at the end of the fourth year. If the fund earns 6 percent interest each year, the terminal (future) value of this uneven cash flow stream at the end of Year 4 is _____. 
A)$2,314
B)$1,833
C)$2,097
D)$2,355
E)$1,784

Quizplus · Accepted Answer

The future value of each cash flow is calculated separately and then summed up: $700*(1.06)^3 + $500*(1.06)^2 + $300*(1.06)^1 + $600 = $2,314.

Joey Is Planning to Invest His Savings in a Fixed