$1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and $3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, their combined future value at the end of year 3 is
A) $ 6,700.
B) $17,000.
C) $12,510.
D) $ 8,141.

Question

Quizplus · Accepted Answer

The future value of each cash flow is calculated using the formula FV = PV * (1 + r)^n. The future value of $1,200 at the end of year 3 is $1,200 * (1.12)^3, the future value of $2,200 at the end of year 3 is $2,200 * (1.12)^2, and the future value of $3,300 at the end of year 3 is $3,300 * (1.12)^1. Adding these gives the combined future value of $8,141.

$1,200 Is Received at the Beginning of Year 1, $2,200