You receive $1,200 today,$2,200 in one year,and $3,300 in two years.If you deposit these cash flows in an account earning 12%,how much money is in the account three years from now?
A)$6,221
B)$5,554
C)$7,269
D)$8,142

Question

Quizplus · Accepted Answer

To find the future value of these cash flows, we calculate the future value of each cash flow separately and then sum them up. The future value of $1,200 today in three years is $1,200 * (1.12)^3 = $1,689.98. The future value of $2,200 in one year in three years is $2,200 * (1.12)^2 = $2,762.88. The future value of $3,300 in two years in three years is $3,300 * (1.12)^1 = $3,696. The total future value is $1,689.98 + $2,762.88 + $3,696 = $8,142.86, which rounds to $8,142.

You Receive $1,200 Today,$2,200 in One Year,and $3,300 in Two