What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?
A) $478.11
B) $980.00
C) $1,024.87
D) $1,364.10

Question

Quizplus · Accepted Answer

To find the value in year 7 of a $700 cash flow made in year 3, we need to compound the cash flow forward 4 years (from year 3 to year 7) at the given interest rate of 10 percent. The formula for future value is FV = PV * (1 + r)^n, where PV is the present value ($700), r is the interest rate (10% or 0.10), and n is the number of periods (4 years). Plugging in the values, we get FV = $700 * (1 + 0.10)^4 = $700 * 1.4641 = $1,024.87.

What Is the Value in Year 7 of a $700