What is the future value of the following cash flows at the end of year 3 if the interest rate is 6%? The cash flows occur at the end of each year.

A) $15,916.78
B) $18,109.08
C) $18,246.25
D) $19,341.02
E) $19,608.07

Question

What is the future value of the following cash flows at the end of year 3 if the interest rate is 6%? The cash flows occur at the end of each year.

A) $15,916.78 
B) $18,109.08 
C) $18,246.25 
D) $19,341.02 
E) $19,608.07

Quizplus · Accepted Answer

To calculate the future value of cash flows, we use the formula FV = CF(1+i)^n, where CF represents the cash flow, i is the interest rate, and n is the number of periods. Since the cash flows occur at the end of each year, we have n=3. Using a financial calculator or Excel, we can calculate the future value as follows:

FV = 5000*(1+0.06)^3 + 6000*(1+0.06)^2 + 7000*(1+0.06)^1
   = $18,246.25

Therefore, the best choice is C.

What Is the Future Value of the Following Cash Flows