2 The discount rate is 8 what is the future value of these c

2. The discount rate is 8%, what is the future value of these cash flows in year Year Cash Flow 1 $985 2 $1,160 3 $1,325 4 $1,495

Solution

Present Value = $ 985 * 1/(1.08) ^ 1 + $ 1160* 1/(1.08) ^ 2 + $ 1325* 1/(1.08) ^ 3 + $ 1495* 1/(1.08) ^ 4

= $ 4,057.25

Future Value = Present Value * ( 1+ Rate of Interest /100) ^ Time

= $ 4,057.25* (1+8/100) ^ 4

= $ 5,519.84

Hence the correct answer is $ 5,519.84