Suppose you receive dollar 500 at the end of each year for the next three years. If the interest rate is 9 percent, what is the present value of these cash flows?
What is the future value in three years of the present value you computed in (a)? Suppose you deposit the cash flows in a bank account that pays 9 percent interest per year.
What is the balance in the account at the end of each of the next three years (after your deposit is made)?
How does the final bank balance compare with your answer in (b)? The present value of the cash flow is dollar 1265.65 (Round to the nearest cent.) The future value of the cash flow is dollar 1639.05 (Round to the nearest cent.) The balance of the account after the end of year 1 is dollar.
The balance of the account after the end of year 2 is dollar. The balance of the account after the end of year 3 is dollar. (Round to the nearest cent.)