An investment will pay $100 at the end of each of the next 3 years, $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. if other investments of equal risk earn 8% annually, what is its present value? its future value?

$1,466.23 Will be your answer mate

Step-by-step explanation:

The present value is calculated by discounting each of the cash flows to the present therefore if we assume no salvage value:  

PV = $100 / 1.08 + $100 / 1.08^2 + $100 / 1.08^3 + $200 / 1.08^4 + $300 / 1.08^5 + $600 / 1.08^6  

PV = $923.98  

Technically, as we have assumed there are no salvage value then in the future value will be zero. If you are asking how much remains in the investment. If you are asking how much the investment has yielded, keep in mind that the cash flows are not by definition reinvested so the time value of those cash flows can't be accounted for. If you do not account for the time value of those cash flows then the future value is just:  

$100 * 3 + $200 + $300 + $500 = $1,300  

However if you use the 8% per annum effective rate as a discount rate to take into consideration the time value of the money which is basically saying that you can reinvest the cash flows at 8% per annum effective then the future value would be:  

$100 * 1.08^5 + $100 * 1.08^4 + $100 * 1.08^3 + $200 * 1.08^2 + $300 * 1.08 + 500 = $1,466.23

you'll get your answer as : $1,466.23 !

step-by-step explanation:

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