You receive $100 today,$200 in one year,and $300 in two years.If you deposit these cash flows into an account earning 12 percent,the value in the account three years from now is ________.
A)less than $600
B)$649
C)$727
D)$815

Question

Quizplus · Accepted Answer

We can use the present value formula to find the value of the cash flows today:

PV = 100 + 200/(1.12) + 300/(1.12)^2 
PV = $517.87

Then, we can use the future value formula to find the value in the account three years from now:

FV = 517.87*(1.12)^3 
FV = $727.27

Therefore, the best choice is (C) $727.

You Receive $100 Today,$200 in One Year,and $300 in Two