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"Joey is planning to invest his savings in a fixed income fund. He manages to deposit $700 at the end of the first year, $500 at the end of the second year, $300 at the end of the third year, and $600 at the end of the fourth year. If the fund earns 6 percent interest each year, the terminal (future) value of this uneven cash flow stream at the end of Year 4 is _____."

Respuesta :

Answer:

        Terminal Value       2,313.51

Explanation:

Year     Cash Flows (in $)       FV Factor        Formula        Terminal Value( in $)

1                   700                           1.1910        (1+6%)^{4-1}              833.71

2                  500                         1.1236         (1+6%)^{4-2}       561.80

3   300                         1.0600        (1+6%)^{4-3}            318.00

4                  600                        1.0000          (1+6%)^{4-4}             600.0

Terminal Value  (833.71 + 561.80+318.00+600.00) =   2,313.51

           

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