At a rate of 10.0%, what is the future value of the following cash flow stream? Years: 1 4 CFs: $0 $75 $225 $0 $300 O a. $672 O b. $746 O c. $726 d. $820

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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**Future Value of Cash Flow Stream**

**Problem Statement:**

At a rate of 10.0%, what is the future value of the following cash flow stream?

**Cash Flows by Year:**

- Year 0: $0
- Year 1: $75
- Year 2: $225
- Year 3: $0
- Year 4: $300

**Multiple Choice Options:**

a. $672  
b. $746  
c. $726  
d. $820  
e. $544  

To solve this, calculate the future value (FV) of each cash flow at Year 4 using the formula for future value:

\[ FV = CF \times (1 + r)^n \]

Where:
- \( CF \) = Cash Flow
- \( r \) = Interest rate (10% or 0.10)
- \( n \) = Number of years until Year 4

Calculate the future value of each cash flow and sum them to find the total future value. Compare with the options provided.
Transcribed Image Text:**Future Value of Cash Flow Stream** **Problem Statement:** At a rate of 10.0%, what is the future value of the following cash flow stream? **Cash Flows by Year:** - Year 0: $0 - Year 1: $75 - Year 2: $225 - Year 3: $0 - Year 4: $300 **Multiple Choice Options:** a. $672 b. $746 c. $726 d. $820 e. $544 To solve this, calculate the future value (FV) of each cash flow at Year 4 using the formula for future value: \[ FV = CF \times (1 + r)^n \] Where: - \( CF \) = Cash Flow - \( r \) = Interest rate (10% or 0.10) - \( n \) = Number of years until Year 4 Calculate the future value of each cash flow and sum them to find the total future value. Compare with the options provided.
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