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.
$$\begin{array} { | l | l | l | }
\hline \text { Year 1 } & \text { Year2 } & \text { Year3 } \
\hline £ 6 , 800 & £ 2,100 & \mathrm { £0 } \
\hline
\end{array}$$

Question

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.
$$\begin{array} { | l | l | l | } 
\hline \text { Year 1 } & \text { Year2 } & \text { Year3 } \
\hline £ 6 , 800 & £ 2,100 & \mathrm { £0 } \
\hline
\end{array}$$

Quizplus · Accepted Answer

The future value of each cash flow is calculated separately and then summed. Year 1: £6,800 * (1 + 0.0725)^2 = £7,834.82; Year 2: £2,100 * (1 + 0.0725)^1 = £2,252.18; Year 3: £0. Total future value = £7,834.82 + £2,252.18 = £10,073.99.

What Is the Future Value of the Following Cash Flows